Blue chips are prized for their high value at the poker table, and in investing, the same term is used to describe blue chip stocks. These well-established company stocks could help provide relative stability and diversification to your portfolio, but they have some important potential downsides to consider. Here's more about what blue chip stocks are and how they work, so you can decide if they're right for you.
What are blue chip stocks?
Blue chip stocks are shares of large, well-established companies with a solid history of growth. While there isn't a single agreed-upon checklist of criteria that gives stocks blue chip status, these companies tend to share key traits, such as being generally successful and well-known.
Characteristics of blue chip stocks
Blue chip stocks span different industries and market sectors. Every company is different, but the following qualities generally apply to these stocks.
Large market capitalization
A company's market cap measures its value by multiplying its total outstanding shares by the current stock price. Blue chip stocks tend to be from large-cap companies, which typically have a market cap of at least $10 billion. Large-cap stocks are typically sought-after, making them easy to buy and sell, which is appealing to investors.
Financial stability
Blue chip stocks are tied to financially strong companies that have healthy balance sheets, minimal debt, and consistently stable earnings. Investing always comes with risk, but blue chip stocks may be well positioned to weather market turbulence over the long term. Younger companies, on the other hand, may be hit harder by economic downturns.
Dividend payments
Dividends are periodic payments in cash or stock that some companies issue to their shareholders, like a thank-you for investing. Dividend-paying companies tend to be bigger, more mature companies that can afford to share their profits with investors. Not all blue chip companies pay dividends, but many do.
Accessibility
You'll find many blue chip stocks listed on major market indexes, including the S&P 500®,1 the Dow Jones Industrial Average,2 and the Nasdaq Composite.3 That means investing in an index fund that seeks to track the performance of one of those indexes would provide exposure to many blue chip companies with a single investment. You can trade blue chip stocks or funds with a regular brokerage account or within a retirement account like an IRA.
Examples of blue chip companies
Because they're well-established, blue chip companies tend to be household names. Some examples are members of the Magnificent 7, a group of tech stocks that outpaced the performance of the S&P 500 in 2023, 2024, and 2025. These include:
- Apple
- Alphabet (the company behind Google)
- Amazon
- Microsoft
- Meta (the company behind Facebook and Instagram)
- NVIDIA
- Tesla
There are plenty of non-tech stocks considered to be blue chip too, including:
- Citigroup
- Eli Lilly
- Exxon Mobil
- Merck
- Wells Fargo
These lists are by no means exhaustive. You'll find blue chip stocks within most sectors, including technology, health care, financial services, manufacturing, and consumer staples.
Advantages of blue chip stocks
- Potentially reduced risk: Thanks to their solid foundations, large-cap blue chip stocks may be less volatile than smaller companies' stocks—especially those that are just starting out or experiencing rapid growth.
- Potential income: If you own blue chip stocks that pay dividends, you could unlock a steady stream of passive income.
- Liquidity: Since blue chip stocks are bought and sold at high volumes nearly all the time, it may be easier to offload shares, whether you need them for quick cash or for tax-loss harvesting, which allows you to sell investments that are down, and then offset realized investment gains with those losses to potentially reduce your tax bill.
- Diversification: Many blue chip companies operate globally and in multiple sectors. That can provide a level of built-in diversification, which could help to keep your portfolio resilient if one or more sectors or markets are down.
- Relative stability: Many blue chip companies are considered "defensive" investments, meaning they may hold up relatively well during economic downturns or inflation due to steady demand for their products.
Disadvantages of blue chip stocks
- Higher cost: Investing in blue chip stocks often comes at a premium. They may have higher price-to-earnings ratios, or how much the market is willing to pay for $1 of the underlying company's earnings. That's primarily thanks to their stability and potential dividend payments.
- Slower potential growth: While stability helps to reduce the risk of sharp price drops, mature companies' growth, if any, might be slower.
- Concentration risk: A portfolio relying heavily on blue chip stocks can also limit diversification if it becomes too concentrated in specific sectors.
How to find blue chip stocks
Finding blue chips stocks is relatively straightforward. Here are 2 options:
- Stock screeners: These tools allow investors to research and filter stocks based on a range of criteria. If you're looking for blue chip stocks, you might search for large-cap companies with consistent dividend payments (called "Quality income" on the Fidelity stock screener) and representation in one of the major indexes.
- Fund screeners: This same idea applies to funds. You can use a fund screener to find mutual funds or exchange-traded funds (ETFs) that focus on large-cap or blue chip stocks. Some even include "blue chip" right in the fund's name.
How to invest in blue chip stocks
You can follow these steps to add blue chip stocks to your portfolio:
- Open an account. If you don't already have an investment account, find a provider that offers low or no fees, ample investment choices, and simple ways to place trades. If you go with Fidelity, you could use our account selector to find the right account for you.
- Fund your account. Link a checking or savings account to add money to your account as needed. You can also opt for direct deposit or check deposit.
- Choose your blue chip stocks or funds. If you don't already have stocks in mind, many brokerage firms have stock screeners, fund screeners, and other tools to help you pick blue chip stocks and funds.
- Buy your blue chip stocks. When you've decided on your investments, select them, buy them, and approve the order. Those assets should appear in your account shortly after.