Why Should One Invest in Blue-Chip Stocks? Stage 2 Research Paper

Business Studies

Blue-Chip Stocks Investment Prompt: Stage 2 – Primary Research Congratulations, you have finished Stage 1 of the Extended Inquiry! At this time, you should have done some initial background research on two potential topics and research questions for your Extended Inquiry project. The next step is picking one of those topics and beginning the research […]

Why Should One Invest in Blue Chip Stocks?

Why should one invest in blue-chip stocks? And how do blue-chip stocks yield a good return? In answering these questions, the type of primary research adopted for this study is the analysis of newspaper articles. The process involved the collection of data and organizing them in a manner that supported the criteria developed. Arguably, this came into use because the research objective involved finding a trend or pattern that would demonstrate why people should invest in blue-chip Stocks. The benefits of the primary research are that the data were relevant and original to the topic under investigation leading to a high degree of accuracy (Yarden et al. 1). Moreover, the data collected were current and better provided a realistic perception regarding the question under consideration. Therefore, based on the findings from the primary research, one should invest in blue-chip Stocks because they provide stable earnings, have regular dividends, strong financials, high diversification, and competitive advantage.

The study by Ghosh produced significant results showing that blue-chip stocks offer good returns on people’s investments. The reason behind the significant returns is that blue-chip organizations have stable earnings over a certain period, earning the trust of their stakeholders and becoming reliable. The results by Ghosh also demonstrate that such organizations appear to do “something right” even during an economic downturn. Another promising finding was based on the research by Miller, who pointed out that the reputation for having stable earnings is one of the reasons many advisers recommend blue-chip stocks. People consider an organization reliable when it has attained stable earnings over an observable period (Miller). In brief, the reliable and stable earnings, in this regard, also suggest similar results for the investor’s portfolio.

A further novel finding from the primary research is that people should invest in blue-chip stocks because it offers regular dividend payouts. Blue-chip organizations demonstrate a strong inclination to remunerate dividends to their shareholders constantly and timely (Ghosh). Such organizations may not display a continuous increase in princes; nonetheless, they cover it with constant payouts of dividends. In the long run, it offers the advantage of asset appreciation and is enriched based on inflation protection and income. The preliminary research results show that although not all blue-chip stock recompense bonuses, most of them do (Miller). The findings confirm that investing in blue-chip stock is a good choice because owning stable stock earnings, which, in turn, pays dividends, enhances the investor’s morale. This is because in addition to the profits from the value appreciation of the stocks with stable earnings, investors are rewarded something “extra” for investing in the organization.

The results from the primary research provide evidence that one should invest in blue-chip stocks due to their strength in the financial base. A typical blue-chip firm has a strong financial standing because it has efficient operating cycles and sturdy financial ratios and is not under a massive debt burden (Ghosh). In essence, this type of investment carries minimal investor risk because they do not undergo fluctuation. The blue-chip stocks support strong business models, cash flows, and balance sheets, leading to continuous development. From the findings, it is clear that the stability of blue chip stocks tends to limit downside risk centered on economic fundamentals by protecting the stock from severe volatility (Miller). Thus, from the results of the primary research, it is clear that people are encouraged to invest in blue-chip stocks because it is perceived to be steady and secure, mainly as a result of the strong fundamental base of the organization.

From the preliminary research results, it is also clear that blue-chip stocks promote diversification by carrying negligible risk and being one of the more stable ones. As such, people are advised to invest in them because they can reduce the risk profile of an investor’s portfolio (Ghosh). The stability this investment provides is also good in assisting investors in maintaining a diversified portfolio. Notably, this may include a strategy to reduce one’s overall risk profile, enabling the investment in stocks with greater risk with the knowledge that there are risky, less volatile, stable, and reliable stocks in one’s portfolio (Miller). In brief, this type of investment has diversified business lines and multiple revenues producing divisions that assist the company in reducing potential losses or corporate risk from operational failures.

Last but not least, extensive results from the primary research show that people should consider investing in blue-chip stocks since they are organizations with a competitive edge in the industry over other players. In essence, this is a category of a venture with substantial distribution regulation acquiring a worldwide manifestation by holding such high contract value and being cost-effective (Ghosh). In this respect, blue-chip stocks remain a bazaar leader, increasing benevolence and offering high-quality contributions.

In summary, based on the results from primary research, it is evident that most investors consider blue-chip stocks a haven. From the findings, it is clear that it is crucial to be aware of why one should consider investing in this type of investment and why they are popular when looking to make a long-term investment. In this respect, blue-chip stocks are more reliable and maintain a lucrative history. In brief, it has various benefits, stable regulation, and governance, exhibits low vitality, and is resilient to downside risk and economic distress. People should also consider investing in blue chip stocks because they promise regular dividend payout and have strong financial performance and steady long-term returns.

Works Cited

Ghosh, Titas. “Blue-chip Stocks and 5 Reasons Why You Should Invest in Them.” Elearnmarkets, 10 July 2018, www.elearnmarkets.com/blog/blue-chip-stocks-reasons-invest/.

Miller, Terin. “What Are Blue-chip Stocks and Why Should You Invest in Them?” TheStreet, 25 June 2019, www.thestreet.com/investing/what-are-blue-chip-stocks–14998250.

Yarden, Anat, et al. Adapted Primary Literature: The Use of Authentic Scientific Texts in Secondary Schools. Springer, 2015.

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Published On: 01-01-1970

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