It has been simple, solid investment advice for decades: buy and hold blue-chip stocks for the long term. And in today’s volatile market, it’s more important than ever to have a solid, growing set of blue-chip investments to power your portfolio.
Here are some of the best blue-chip stocks for the long-term investor in 2021.
Data last updated: May 12, 2021 2:10 AM EDT
Frequently Asked Questions
1. What Are Blue-Chip Stocks?
In the 1920s, when the term first came into use, “blue chip” simply meant a stock with an expensive price. Today, though, “blue chip” refers to stocks that are reliable and financially sound. They offer ownership in businesses that are clearly built for the long haul.
For example, Walmart (NYSE:WMT) will likely be around 50 years from now. The same is true for Amazon (NASDAQ:AMZN). It’s also difficult to imagine a world without Disney (NYSE:DIS), a company whose library of films will still have real value for generations to come.
The technology sector has world-beaters of its own. Microsoft (NASDAQ:MSFT) plays an integral role in the online ecosystem and Adobe (NASDAQ:ADBE) is one of the best-run companies out there. Few firms in any industry have generated the consistently impressive growth of those two software giants.
2. How Do I Invest in Blue-Chip Stocks?
One simple way to select blue-chip stocks is to focus solely on industry leaders. For instance, Amazon and Walmart have bucked the retail slump, growing revenues even as smaller rivals struggle. The same is true for The Home Depot (NYSE:HD) and Costco (NASDAQ:COST). Both companies dominate their market segments.
But there’s also room for growth within blue-chip stocks. Apple (NASDAQ:AAPL) survived its near-bankruptcy in 1997 to become one of the world’s most valuable companies. Today, the next generation of tech companies are now starting to gain blue-chip status, too. PayPal (NASDAQ:PYPL) has entrenched itself in worldwide payments. Meanwhile, Uber (NYSE:UBER) has a presence in ride-hailing and delivery that looks nearly unassailable.
3. Are Blue-Chip Stocks Safe?
All stocks have risk. In fact, all investments have risk. But blue-chip stocks, owing to their market dominance and competitive moats, should have lower risk than the market as a whole.
Investors looking for even more defensive stocks can also consider utilities and telecom, blue-chip companies that have less exposure to economic cycles.
Verizon (NYSE:VZ) is a perfect example. Customers of the telecommunications giant won’t end their service even in a recession. Utilities like NextEra Energy (NYSE:NEE), which is also a clean-energy play, offer similar reliability. So do healthcare companies, with UnitedHealth Group (NYSE:UNH) being a clear leader in that sector.
Overall, blue-chip stocks are relatively safe. That’s why the advice to own blue chips has held for so long — and still holds today.