Blue-chip stocks are highly priced market stocks, which have emerged as a preferred investment option over recent years. The companies who issue blue-chip stocks are highly esteemed in the stock exchange market and tend to have a stable financial record and credibility.
Besides their repute, the fact such companies extend attractive dividend pay-outs can be credited for the growing popularity of the said stock. However, before investing in blue-chip stocks, individuals should equip them with a few essential details.
Stocks that are issued by blue-chip companies, i.e. companies with a large market capitalisation are termed as blue-chip stocks. Companies who issue these shares are well-established and enjoy great market repute; therefore, the shares issued by them are highly valued in the market.
Individuals can invest in Blue-chip stocks in India either directly or through Mutual Funds.
The features of Blue-chip stocks are listed below –
Blue-chip stocks generate returns quarterly in the form of dividends. The fact that companies which are well-established also serve as a safe investment avenue for most investors. With this safety comes the assurance of earning steady but guaranteed returns.
Blue-chip companies have enough capital to clear their financial dues and obligations easily. This, in turn, makes the shares issued by such companies high in creditworthiness.
Since big companies with stable financial performance issue these stocks, the risk factor associated with blue-chip stocks are comparatively less. Investors can further reduce the burden of risk associated with blue-chip shares by diversifying their investment portfolio.
The term of investment is usually over 7 years. Such extended term makes Blue-chip stocks suitable for achieving long-term financial goals owing to its long investment horizon.
Blue-chip companies are those large companies who have reached their maximum growth potential. This influences the Blue-chip shares in India who undergo slow but steady growth over time.
The gains generated through blue-chip shares In India are treated as income under Section 80 C of the Income Tax Act. The short-term capital gains are subjected to taxation at the rate of 15%. However, the long-term capital gains exceeding Rs. 1 Lakh are subjected to taxation at the rate of 10%.
Blue-chip stocks in India are considered to be a desirable investment option for achieving long-term financial goals. Here are a few reasons to invest in Blue-chip shares –
However, owing to their higher price, blue-chip shares may not be suitable for small investors.
The strong financial standing, excellent market valuation and credit worthiness of blue-chip stocks act in favour of their investors and extend multiple benefits to them.
Blue-chip stocks investors would avail these following advantages –
Owing to their market goodwill and credibility, blue-chip shares in India come with a low-risk factor. The low-risk burden further makes them suitable for risk-averse and conservative investors.
However, investors who want to earn greater returns with limited exposure to market risks can opt for these alternative investment options –
Even though the growth of the real estate market in India has slowed down a little, it is still one of the most profitable investment avenues in the county. Investors can purchase, rent or sell residential and commercial properties and generate income in due course.
ETFs are a collection of securities which are traded on exchanges which are considered as a low-risk investment option. ETFs often consist of stocks, bonds, commodities and other investment instruments and come with a low expense ratio and lower associated charges.
As per their requirement, investors can invest in Gold ETFs, Liquid ETFs, International ETDs, or Bank ETFs.
Investors who want to generate returns and tax benefits on the same can invest in fixed deposit schemes instead of blue-cap stocks.
Depending on their requirement, investors can park their money in fixed deposit for both long-term and short-term. FDs also allow investors to avail of a loan against it in case of an emergency.
Government bonds are low-risk investment options that are issued by the government of India and monitored by the RBI. Such bonds extend fixed interest to their investors and allow them an opportunity to diversify their investment portfolio. Additionally, government bonds extend tax benefits to investors and offer liquidity.
Blue-chip stocks in India are an attractive investment option for individuals who want to generate steady returns over a long period. However, investors can always explore other investment avenues and enhance the profitability of their investment portfolios.