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What is a Blue Chip Stock

If you are new to the stock market you may be wondering what the term ‘blue chip stock’ means. This post will explain exactly what a blue chip stock is giving you a couple of examples. The history of the phrase will then be considered.

What is a Blue Chip Stock?

A blue chip stock is a stock that is considered a ‘safe’ investment. It refers to the stock of a very well established company that has good, stable earnings and few liabilities (debts). These types of shares pay regular dividends and tend to hold their value on the stock market even when the business is not earning as much as usual. Examples of blue chip stocks are shares in Wal-Mart and Coca-Cola.

History of the Phrase

The term ‘blue chip stock’ derives from casinos where the blue chip represents the highest value chip. Oliver Gingold coined the phrase sometime in 1923 or 1924. After seeing several trades of more than US$200 (a very considerable amount at the time), he told an associate that he would have to return to the office to “write about these blue chip stocks”. While the term was first used to describe high-priced stocks, today the term refers to safe and high-quality stocks.

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