by Christopher Wiegering

Created on: June 10, 2009

The term 'Blue Chip' stock commonly refers to high quality stock from leading companies. They are usually high in price, regarded as safe and are known to pay good dividends. They make up the core of the Dow Jones and S&P 500 so their price usually follows the index's growth. The term is said to have originated as an allusion to the most valuable chips used in casinos for gambling. Some examples of Blue Chip stock are General Electric, Google, IBM, Procter and Gamble, Exxon-Mobile and Wal-Mart.

Blue Chip stock has always made up an important part of investors' portfolios. But like most things in life, there is an upside and a downside to investing in Blue Chip stock. On the one hand it is considered a low risk investment because it is stock of economically stable and prestigious companies. It is easy to follow in the news; you can often hear or read up on its progress. In times of economic turmoil Blue Chip stock present moderate losses in comparison to stock of less long-standing companies and it is less volatile than small caps in general. On the other hand, it usually yields a lower dividend than some of the more 'risky' small cap stock. But the most outstanding disadvantage is that it is usually more expensive. After weighing the pros and the cons, it is still worthwhile to invest in good quality stock. But it just so happens that right now, as I write this article, Blue Chip stock is not that expensive after all. Not just that, it has been already cheaper toward the beginning of the year.

Since the second quarter of 2009 stock has been increasing in value to the point where the only economic recovery similar to this one was after the great depression. Not taking advantage of Blue Chip stock at great prices is, by omission, almost worse than having lost money after last year's price plummet. Of course there is nothing to guaranty that Blue Chip stock will continue to value itself but there have been sufficient indications so far to indicate we are in are heading toward improvement. If you are careful enough, you can invest significant amounts and still take advantage of the situation. Here is some more good news - There is bound to be a couple more serious pullbacks before the end of 2009 and maybe even into 2010. So you have to try to minimize the opportunities already lost by waiting for some good bargains to appear. As 2009 is far from the potential limit of the market, there is still some very affordable stock out here.

However, you can't ever be too careful. Look out for possible over-valued market bubbles and stay as far away from them as possible. Look only for stock that is truly undervalued. In my opinion the year of 2009 will be remembered as the year to have invested.

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