Why invest in Blue Chips?

[Eager]

I'm serious! Why do people invest in Blue Chip shares with their own hard-earned cash, when all they are doing is replicating their own superannuation accounts?

While abiding by the philosophy that you shouldn't invest any money that you can't afford to lose, I am comfortable taking a bit more of a risk with my own money - mind you my super is invested defensively at the moment - but the largest company that I own shares in directly (BKN) is a minnow compared to the institutional standards of TLS, WOW, BHP or the major banks etc. And, I have an interest in several others that might be considered as speculative that superannuation companies wouldn't touch with a barge pole, but to me they have good prospects and are worth the risk.

I can understand the feeling of relative safety that comes from investing in a large solid company like those Blue Chips I mentioned, but if anyone wants to spend their own money on stock like that, why not just put the money into your superannuation account instead?

 

[tothemax6]

I can understand the feeling of relative safety that comes from investing in a large solid company like those Blue Chips I mentioned, but if anyone wants to spend their own money on stock like that, why not just put the money into your superannuation account instead?

Um, you can't get the money back out? And the super funds are gouge artists that invest poorly, take a cut of any profits, and charge fees?

 

[Muschu]

I'm serious! Why do people invest in Blue Chip shares with their own hard-earned cash, when all they are doing is replicating their own superannuation accounts?

While abiding by the philosophy that you shouldn't invest any money that you can't afford to lose, I am comfortable taking a bit more of a risk with my own money - mind you my super is invested defensively at the moment - but the largest company that I own shares in directly (BKN) is a minnow compared to the institutional standards of TLS, WOW, BHP or the major banks etc. And, I have an interest in several others that might be considered as speculative that superannuation companies wouldn't touch with a barge pole, but to me they have good prospects and are worth the risk.

I can understand the feeling of relative safety that comes from investing in a large solid company like those Blue Chips I mentioned, but if anyone wants to spend their own money on stock like that, why not just put the money into your superannuation account instead?

A fair but global question - with many variables. Age, risk profile and asset base are just 3.

 

[Tightwad]

super funds can be quite average really.. blue chips seem familiar and safe to a lot of investors, have less volatility, high liquidity, longer track records and more information.

For me there are more interesting companies around, but it may depend on your investment strategy - some ppl are trading blue chips that are trending upwards.

 

[So_Cynical]

There are some super funds that offer many many investment choices with some of those choices being very much non blue chip...however i can understand how some can come to the conclusion there is little choice.

 

[Eager]

Fair enough replies.

I guess I could qualify my question by suggesting that I was referring to the staid, dividend seeking, buy-and-forget type of investor.

 

[Julia]

While abiding by the philosophy that you shouldn't invest any money that you can't afford to lose, I am comfortable taking a bit more of a risk with my own money - mind you my super is invested defensively at the moment - but the largest company that I own shares in directly (BKN) is a minnow compared to the institutional standards of TLS, WOW, BHP or the major banks etc.

I wouldn't get over confident about BKN. I held a substantial chunk of this company when they came out with a totally unexpected profit downgrade in December 07 and the SP lost around 50% in about half an hour from memory.

I don't recall that happening with too many of the 'staid blue chips' but feel free to jog my memory.

 

[Sir Osisofliver]

I'm serious! Why do people invest in Blue Chip shares with their own hard-earned cash, when all they are doing is replicating their own superannuation accounts?

Who says I have to use my cash? At certain points in the economic cycle I can positively gear a portfolio resulting in a nil holding cost. Which means I can be relaxed about short-term fluctations in the market as long as I am getting the dividend yield.

While abiding by the philosophy that you shouldn't invest any money that you can't afford to lose, I am comfortable taking a bit more of a risk with my own money - mind you my super is invested defensively at the moment - but the largest company that I own shares in directly (BKN) is a minnow compared to the institutional standards of TLS, WOW, BHP or the major banks etc. And, I have an interest in several others that might be considered as speculative that superannuation companies wouldn't touch with a barge pole, but to me they have good prospects and are worth the risk.

I can understand the feeling of relative safety that comes from investing in a large solid company like those Blue Chips I mentioned, but if anyone wants to spend their own money on stock like that, why not just put the money into your superannuation account instead?

Others have mentioned some good reasons about super funds, but here is a simple rule, the more people between you and the asset the less you get. Why would I choose to pay other people's business costs?

Cheers

Sir O

 

[nomore4s]

Fair enough replies.

I guess I could qualify my question by suggesting that I was referring to the staid, dividend seeking, buy-and-forget type of investor.

Have a look at the spreadsheet in post 15 of the link below.

https://www.aussiestockforums.com/forums/showthread.php?t=22422&p=627246&viewfull=1#post627246

There are plenty of different reasons and ways to invest in blue chips. The above strategy is aimed at providing a long term passive income stream. Not as exciting as watching a small cap double in a couple of weeks/months but not as painful as watching a small cap halve in a few days either.

And trading blue chips can also be profitable contrary to popular belief, if you can get the timing correct. I find trading blue chips can be a bit easier at times due to the more stable moves and the fact they tend to swing with the overall market. I of course still trade any other stock I see opportunity in but in the current conditions I find blue chips provide plenty of opportunities for very good swing trades.

 

[georgebell]

I'm a pretty green trader but have found some excellent returns of late through short term trading the blue chip stocks. I have some very useful software that assists with alerting potential options. Having not seen very good volumes being traded on mid-low value stocks, the blue chips have certainly proven to be a great option. Perhaps a good time to buy a number of the big players at low prices for the longer term as well..?

 

[robusta]

The question to me is what is a blue chip?

Is it QAN, LEI, IAG, MQG, QRN, AIO?

If it is I am happy to leave alone.

But if we are talking BHP, CSL, CBA, ANZ, WBC, WOW at the right price, different story.

 

[Eager]

I wouldn't get over confident about BKN. I held a substantial chunk of this company when they came out with a totally unexpected profit downgrade in December 07 and the SP lost around 50% in about half an hour from memory.

I don't recall that happening with too many of the 'staid blue chips' but feel free to jog my memory.

I remember that day well! I held BKN back then as well (and since, as well as now) and my finger hovered over the Sell button the day before they fell - I was wanting them to get to $15 again like they did a month earlier, but they never quite made it - but nevertheless, I held them for a bit longer and still made a handy profit. I got in at $6.17 in Nov 06 and out at $8.44 in Jun 08, so I still made good money.

I don't know why anyone would be shy with them now because of one knee-jerk event from 4 years ago.

I've held them 4 times now and always made money, but I'm disappointed not to get in for $1 in Mar 09. Instead, I had to be content with buying in Nov 08 and doubling my money in 13 months. This time around I view them more as a keeper.

 

[Judd]

Investopedia

Blue chip company: a well-established and financially sound company that has demonstrated its ability to pay dividends in both good and bad times.

It's one definition and notice the emphasis. Savvier people than me will make more money out of the sharemarket and good on them: they work hard at their profession. For me, it's a long, long time ago since I went to sleep worrying about what the sharemarket did that day or will do tomorrow.

 

[robusta]

Investopedia

Blue chip company: a well-established and financially sound company that has demonstrated its ability to pay dividends in both good and bad times.

That is the best definition I have seen. Note it does not include market cap. Many of the ASX50 fail this test, while many small to medium caps pass.

It's one definition and notice the emphasis. Savvier people than me will make more money out of the sharemarket and good on them: they work hard at their profession. For me, it's a long, long time ago since I went to sleep worrying about what the sharemarket did that day or will do tomorrow.

What a great attitude, it is easier when you own quality.

 

[matty77]

Because my super is in cash at the moment?

 

[Julia]

Because my super is in cash at the moment?

Is the above a reply to "Why invest in Blue Chips?"

 

[Bill M]

I'm serious! Why do people invest in Blue Chip shares with their own hard-earned cash, when all they are doing is replicating their own superannuation accounts?

Because it doesn't really. I find I get better returns out of my blue chips than what my super fund does. I sometimes really wonder what exactly is in their "shares" options. The government has received a report recommending that super funds disclose exactly which stocks they hold but the super funds are fighting this disclosure rule. I wonder why?

Also as someone else has said, you whack it into super and you can't get it until you are 60 y/o.

I can understand the feeling of relative safety that comes from investing in a large solid company like those Blue Chips I mentioned, but if anyone wants to spend their own money on stock like that, why not just put the money into your superannuation account instead?

With regards to blue chips versus second line and speculative stocks, the answer is simple for me. I do not want to risk any of my capital on say a blue sky mining company that is a could be or a would be and then they go bust and I lose the lot. I now only invest in companies that are very strong, will not go bust and best of all pay fully franked dividends, my retirement depends on that. Cheers.

 

[Eager]

Investopedia

Blue chip company: a well-established and financially sound company that has demonstrated its ability to pay dividends in both good and bad times.

I like your way of thinking.

If the definition of blue chip you provide is true, then I probably have a holding in more of them than I thought! Half of the companies in my portfolio in fact, even though I thought none of them actually qualified because of market capitalisation.

I ask then, by definition could all other companies be defined as speculative?

 

[Judd]

......I ask then, by definition could all other companies be defined as speculative?.........

I am sure that others have a more appropriate answer. I know very little about shares which is why, apart from cottage garden holdings from a time when I thought I did know, I now use Listed Investment Companies.