We hear a lot about blue chip companies here and there a lot and also consider them for wealth creation. Let’s understand that what are blue chip companies and how do they help in wealth creation?..
The blue chip companies are those which are mostly large cap companies and high quality management. The fundamentals of these companies are very sound and they have a hard rocked plinth in terms of generating revenues. They are the companies which have been into business for last many years and their growth and profits have been quite consistent, predictable and consistently growing.
Mostly the blue chip companies give good dividends, show normal growth and reward their investors through bonus issues and right issues. Their growth will not be multi bagger but chances of losing capital are also very rare and limited.
The blue chip stocks normally give 15-20% returns per annum and selection process is simple. One need to focus on large cap companies, consistent sales, profit and dividend growth and the nature of business and its potential and future.
In next few articles I will explore that how do we go for searching of such stocks and what simple things must be a thumb rule.