What does Blue-Chip Stock mean?

A blue-chip stock is shares in a large, well-established, financially stable company — think Apple, Coca-Cola, or Johnson & Johnson.

Blue-chip stocks belong to large, well-established, financially sound companies with a long track record — think Apple, Coca-Cola, or Johnson & Johnson. They're generally less volatile than smaller companies and often pay steady dividends, though they rarely grow as fast as newer, smaller companies.

Blue-Chip Stock example

Large, established companies with long records of profits — think household-name banks, retailers and consumer brands — are typically called blue chips. Many have paid dividends for decades.

Common beginner mistake

Assuming blue chips can't fall a lot. Even the biggest companies have dropped 50% or more in bad years, and some former blue chips went bankrupt.