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WHAT IS A BLUE CHIP STOCK? (Dividend Stocks & Income Investments) - YouTube
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[Music]
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so I recently did a video talking about
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how to become a millionaire with five
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dollars a day by investing in a
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portfolio of blue chip stocks and
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investment grade bonds and that video
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accumulated over half a million views
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which is absolutely incredible
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so I have a lot of new subscribers on
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this channel and I want to thank you
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guys for subscribing first of all it's
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awesome to have a larger community here
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and really appreciate that
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but I had a lot of people asking me to
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talk more about blue chip stocks and
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kind of explain what a blue chip stock
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is that for somebody who has no idea so
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I'm going to be doing a whole video here
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talking about blue chip stocks we're
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going to talk about what a blue chip
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stock is why a blue chip stock is not
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actually recession-proof so they are a
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lower risk but there is still a risk of
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those companies going bankrupt then
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we're going to talk about why people
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invest in the blue chip stock and then
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we're going to go over 30 examples of
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blue chip companies so let's get started
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with this so what is a blue chip stock
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so a blue chip stock is basically the
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stock of a well-established company this
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is a financially stable company with a
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track record their long-standing and
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time-tested so these are companies that
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have been around for a very long time
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these are not brand new companies or
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startups these are companies that people
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have been investing in and putting their
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hard-earned money into for decades and
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they have decades of success they have a
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track record that spreads over many
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decades as well and they are known for
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being very responsible with their money
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and just well-run companies that have
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been returning dividends and profits to
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shareholders for many many years so they
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usually have a large or they always have
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a large market capitalization now market
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capitalization is basically the price
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per share times the outstanding shares
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or basically the value of that company
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in terms of share price so you would
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take the shares outstanding times the
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share price and you would get a dollar
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amount and blue chip stocks are usually
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companies with a market capitalization
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exceeding 100 billion dollars so that is
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one way you can tell the actual size of
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a company is whether or not whether they
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are a small cap mid cap large cap or
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mega cap stock and you're going to see
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most blue chips falling into the
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category of a large or mega cap stock
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exceeding 100 billion dollars in value
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now typically blue chips
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are paying dividends so if you're not
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familiar with what a dividend is every
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single quarter these companies share a
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portion of their profits in the form of
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a cash dividend to shareholders so four
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times a year
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they pay out a dividend many people have
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a dividend reinvestment plan or dividend
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reinvestment program where the dividends
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are automatically reinvested back into
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the issuing stock but if not they just
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deposit that into your actual trading
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account into the cash account and then
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it's up to you to either withdraw that
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money or reinvest it and I don't want to
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beat a dead horse here but I'm sure as
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you guys know I encourage you to
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reinvest those dividends take advantage
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of compound interest but you're going to
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find most dividend stocks or blue chip
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stocks and most blue chip stocks pay
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dividends now not only do they pay
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dividends they have a history of
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consistent dividends so they've been
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paying them for many years or many
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decades in some cases and they also have
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a track record of rising dividends so
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over time the dividend yield is
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increasing or the amount they're paying
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out in dividends is increasing now this
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is also a company with dependable
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earnings so you're not going to see any
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earning surprises in most cases usually
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they're meeting expectations and they're
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just doing what's expected they're
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boring but in many cases especially with
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investing boring is good with blue chip
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stocks they're named after the blue chip
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in poker so if you want a little piece
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of trivia if you're talking to someone
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the reason they're called the blue chip
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stock is because the blue chip in poker
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is the chip with the highest amount of
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value so they see these stocks as the
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stocks with the highest amount of value
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that's why they're called the blue chip
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stock while there is no official list of
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blue chip stocks many people use the Dow
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Jones Industrial Average to get a list
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of blue chip stocks because those are
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some of the industry leaders and that is
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a very selective list of stocks that are
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on there and those stocks have a very
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large market capitalization so that's
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the list we're going to be using here
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when we talk about some blue chip stocks
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we're going to look at the 30 stocks on
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the Dow Jones Industrial Average so why
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would you invest in the blue chip stock
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there's a number of reasons to do this
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first of all the dividends allow for
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compound interest so when you take those
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dividends and you reinvest it in the
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stock then those dividends will allow
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you to earn dividends in the future
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which is essentially compound interest
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at that point so you're earning
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dividends on dividends very similar to
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earning interest on interest second of
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all there's lower risk due to the track
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record so because these are large
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bunnies that are well-established
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they're dependable they have a track
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record of success and a track record of
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dependable earnings they are lower risk
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because they are very well managed in
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they're very well run and you're not
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going to see these companies typically
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as the ones that are going bankrupt
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we're going to talk about some that have
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gone bankrupt in a second so while it's
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not impossible it's far less likely than
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looking at maybe a growth scroll stock
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or a mid-cap stock as far as looking at
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a stock that may go bankrupt or be
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irresponsible with their money
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historically they have been great
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long-term investments and another thing
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I like about blue chip stocks is the
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fact that most investors are long-term
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investors so there's a lot less
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volatility so if we do see a market
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correction usually the blue chip stocks
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will hold their value more because less
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people are going to be selling out of
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fear usually the people investing in
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blue chip stocks are more intelligent
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investors who know what they're doing so
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they're in it for the long term and when
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they buy a stock like let's say AT&T or
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Verizon something like that when they're
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buying a stock like that they're not
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going to be holding that stock for two
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weeks and then selling it and then
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buying it back they're probably
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investing for that stock for five to ten
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years or more and they understand things
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like market Corrections and bear markets
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and they're not going to be the ones to
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sell out of panics so usually the people
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holding blue chip stocks are long-term
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investors the other thing is you get a
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cash payment from your investments so
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some people like to invest in dividend
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stocks and then actually take that cash
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payment and some people even live off
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that cash payment so they have enough
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money invested that they can live off of
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their dividends so that's one way people
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do it the advantage is being paid in two
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ways so you can also be paid by an
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increase in the share price as well as
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getting dividends so that is why people
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like dividend stocks as well because
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you're paid in two different ways the
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other thing this allows you to do is
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this allows you to hedge against loss so
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let's say your stock goes down in value
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but you actually had dividends that
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exceeded how much you lost so at that
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point you're able to hedge against your
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loss so if your stock went down 3% in
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value but you made a 4% dividend yield
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you're actually up 1% on that investment
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because your dividends protected against
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that loss the other reason is that many
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flee to them in times of uncertainty so
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when there is market uncertainty many
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people flee to these giants into the
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blue chip stocks because they're known
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for being
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basically recession-proof but they're
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not completely recession-proof i would
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say they are recession resistant would
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be a good word they're more resistant to
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bad economic conditions due to their
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track record but they are by no means
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invincible so let's go over that right
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now let's cover that so blue chip stocks
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are not recession proof I want to give
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you guys a couple examples of gigantic
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blue chip companies that went under so
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just one example here as far as a
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correction goes in 1987 the Dow Jones
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Industrial Average saw its worst
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correction and it lost 23 percent in one
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day
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in 2008 shares of Citigroup were less
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than an ATM fee so if you went to an ATM
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and you took out money you were spending
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more on that ATM fee than it would cost
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to acquire a share of Citigroup that's
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how low share prices went to that stock
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in 2008 Lehman Brothers went bankrupt as
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part of the 2008 stock market crash that
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was an investment bank in 2008 General
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Motors went bankrupt also part of that
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2008 stock market crash that was
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obviously an automotive company in 2001
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another gigantic blue chip company Enron
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went bankrupt they were an energy
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trading company and as far back as 1987
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Texaco and oil company went bankrupt so
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these are very large companies that
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despite being these blue chip stocks
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still went bankrupt so I don't want you
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guys to think that it's impossible that
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these companies are just invincible
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while it is much lower risk the risk is
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still there when we see serious economic
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decline there is the possibility for
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these giants to go under alright so the
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last thing we're going to look at let's
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take a look at some blue chip companies
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so like I said many people use the Dow
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Jones as a way to look at blue chip
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stocks as the 30 companies listed on the
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Dow Jones so we're going to look at the
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Dow Jones stocks as of these are as of
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January 2017 so I believe this is still
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current they don't usually change
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companies around that often but as far
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as technology companies go we have IBM
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we have Microsoft Apple Intel GE which
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may not be technology but I was trying
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to merge these all together and I kind
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that's kind of a gray area calling GE a
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tech stock because they're involved in
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so many different things United
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Technologies Cisco and Verizon AT&T used
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to be on this list I'm not sure why
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they're not anymore but drives in and
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AT&T are to blue chip companies that
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people love to
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Weston then as far as food companies go
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we have McDonald's we have coca-cola I'm
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sure you know someone who is bought coke
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stock for their kids
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people love coca-cola stock people have
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been investing in it for years as far as
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oil companies go we have Chevron and
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Exxon as far as banking goes we have
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American Express Visa JPMorgan Goldman
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Sachs as far as retail goes we have
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Walmart we have Home Depot and new to
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this list is Nike as far as industrials
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go we have 3m DuPont pharmaceutical
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companies we have Johnson & Johnson
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Merck & Co and Pfizer and as far as
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other companies that didn't really fit
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into one of these categories there's
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Procter & Gamble Boeing caterpillar Walt
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Disney travelers and UnitedHealth so
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these are just examples of gigantic blue
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chip companies that a lot of people
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invest in and companies that pay
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dividends and if you're looking for some
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examples of blue chip stocks there are
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some examples are for you or you know
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look at other ones as well and keep
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track of which stocks are on the Dow
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Jones and make sure to if you're
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investing in blue chip stocks you're
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diversified across many different
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sectors so I wouldn't say take all of
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your money and invest in all of these
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technology stocks I would pick ones from
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different sectors that's kind of why I
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broke it down into different sectors and
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many of these you could break down even
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further because obviously Verizon is not
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in the same business as Intel and Apple
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is not in the same business as United
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Technologies so you can break it down
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even further but anyways guys I just
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kind of wanted to cover the basics of
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blue chip stocks so hopefully you have a
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better idea of what these are and
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hopefully you'll be able to pick some
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out to invest in if you're looking for
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some blue chip investments but if you
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guys enjoyed this video please drop a
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like and if you are new to my channel
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please consider subscribing to be
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notified of any future uploads and as
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always I thank you guys for taking the
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time to watch this video
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you
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