WHAT ARE THE RISKS?
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blue chip stocks seek conservative growth rates and a safe investment. The
consistent revenues and earnings of blue chips attract long-term
investors. They don't grow in value as quickly as small-cap stocks, such
as new technology companies, but they pay dividends on a regular, predictable
basis. The price per share of blue chip stocks tends to be very
high. As a result, the dividend yields (the annual dividends per
share divided by the stock prices) of blue chip companies tend to be lower than
those of small-cap companies.
The historical strength and financial stability of blue chip
companies give blue chip shares low market price risk. This is the
risk that share prices will fluctuate. Because blue chips are covered so
often by the financial media, there are few surprises when blue chip stock
prices do change. The relatively low price risk of blue chip shares means
their returns aren't generally as high as other, more volatile stocks.
The performance of a blue chip company is often an indicator of
how well the entire stock market will perform.
Where can you find performance information on blue chip stocks? You'll find out in the
next tutorial section.