Many investors today are reeling from the effects of the recession.
After losing so much money in speculation and sub-prime trading, investors are more wary of what they will invest in.
In fact, investors suddenly went from daring to conservative - they went from investing in risky instruments to investing in solid, stable-growth instruments.
What drove this flock to blue-chips? One of the reasons could be that these stocks follow the growth of the main stock indexes - meaning, US blue chips follow the growth of S&P 500, Japanese blue chips follow the growth of Nikkei 225, and so on.
As everyone knows, stock indexes are the best indicators of a nation's corporate sector activities and investor perceptions of an area.
As such, they make a great investment since they are the benchmark stocks in that country - all other stocks simply follow their lead, while some exceptional ones outperform them.
If some companies can perform better than blue chips, why not take their stock instead? Well, first of all it's not easy to spot these companies before they become top performers.
Second, it takes a lot of guts - these companies are still at the make or break stage of development.
Third, their growth could be spurred on only by economic trends - dot com bubble, remember? Blue chips, on the other hand, provide needs people will continue purchasing, and can weather any kind of trend simply because they are already a necessary part of people's lives.
Also, blue chips are very much visible - you can see where they came from, and you can probably deduce where they will be going in the future.
Which makes them a good, secure investment.
Unless of course poor management kicks in.
So you might be asking, what makes a blue chip? And, how will we know if a blue chip will remain a blue chip in the coming years? For the first question, a blue chip is a blue chip because it is an institution - it may have been a pioneer, or a powerful innovator.
Being innovative is a sign of a company's longevity - the more innovative a company is, the longer it will last.
Hey, the great company of KongÅ Gumi Co.
, Ltd.
lasted 1,400 years from 578 until it was absorbed by Takamatsu in 2006.
Though it wasn't a corporation, it had the qualities of a blue chip - the stable industry, strong and competent leadership, and the flexibility and stability at the same time.
For the second question, keep an eye open for the trends and discoveries of the time.
If a discovery leads to your blue chip's products being obsolete, jump ship while you still can.
And observe the company leadership carefully.
If they are producing good results and are harmonious in their dealings, and innovating on new discoveries as well, stick to your company.
After losing so much money in speculation and sub-prime trading, investors are more wary of what they will invest in.
In fact, investors suddenly went from daring to conservative - they went from investing in risky instruments to investing in solid, stable-growth instruments.
What drove this flock to blue-chips? One of the reasons could be that these stocks follow the growth of the main stock indexes - meaning, US blue chips follow the growth of S&P 500, Japanese blue chips follow the growth of Nikkei 225, and so on.
As everyone knows, stock indexes are the best indicators of a nation's corporate sector activities and investor perceptions of an area.
As such, they make a great investment since they are the benchmark stocks in that country - all other stocks simply follow their lead, while some exceptional ones outperform them.
If some companies can perform better than blue chips, why not take their stock instead? Well, first of all it's not easy to spot these companies before they become top performers.
Second, it takes a lot of guts - these companies are still at the make or break stage of development.
Third, their growth could be spurred on only by economic trends - dot com bubble, remember? Blue chips, on the other hand, provide needs people will continue purchasing, and can weather any kind of trend simply because they are already a necessary part of people's lives.
Also, blue chips are very much visible - you can see where they came from, and you can probably deduce where they will be going in the future.
Which makes them a good, secure investment.
Unless of course poor management kicks in.
So you might be asking, what makes a blue chip? And, how will we know if a blue chip will remain a blue chip in the coming years? For the first question, a blue chip is a blue chip because it is an institution - it may have been a pioneer, or a powerful innovator.
Being innovative is a sign of a company's longevity - the more innovative a company is, the longer it will last.
Hey, the great company of KongÅ Gumi Co.
, Ltd.
lasted 1,400 years from 578 until it was absorbed by Takamatsu in 2006.
Though it wasn't a corporation, it had the qualities of a blue chip - the stable industry, strong and competent leadership, and the flexibility and stability at the same time.
For the second question, keep an eye open for the trends and discoveries of the time.
If a discovery leads to your blue chip's products being obsolete, jump ship while you still can.
And observe the company leadership carefully.
If they are producing good results and are harmonious in their dealings, and innovating on new discoveries as well, stick to your company.