Why you should already be investing in blue chip stocks

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Why you should already be investing in blue chip stocks

Why you should already be investing in blue chip stocks

02 September 2022
By OCBC

3 mins read

Investing might not sound as exciting as going on an overseas holiday or hanging out with your friends at a café. But like riding a bicycle or cooking a simple meal, it’s something that everyone should learn.

Investing helps you preserve the value of your hard-earned money, and even better, let it grow beyond what it was originally worth. As time passes, inflation weakens the purchasing power of your money. That means any given sum of money will only be able to buy less and less over time. For instance, 20 years ago, you could buy a decent plate of chicken rice at a hawker centre for just $2. But fast forward to 2022, that $2 can barely get you a drink. Therefore, we recommend that you invest your money to beat inflation, instead of leaving it in a bank account.

While you might not have too many financial commitments when you’re young, you’ll definitely need more money at some point in the future. You will need a retirement nest egg to draw upon when you finally decide to stop working. And you might also need larger sums to pay for a home or your future child’s education. Whatever it is, investing can help you reach all of these goals. So it’s best to invest as early as possible.

For extra support, OCBC Life Goals is a useful (and free) tool that can help you work towards your financial goals.

Now back to investing. Ever heard of blue chip stocks? These are shares belonging to companies that are well-established and have a track record of financial stability. Basically, blue chip companies are businesses that people trust. Blue chip stocks offer a suitable way to invest in equities at any age and are one of the more reliable ways to grow your money over a long period of time.

Here are some reasons why you should start investing in blue chip stocks.

Blue chip stocks offer a low-risk way to invest for the long term

If your idea of investing is a roller coaster ride of heart-stopping speculation, you've been watching too many Hollywood movies set on Wall Street!

There are many ways to invest depending on your risk tolerance. It's up to you to build your portfolio based on what you are comfortable with.

Whether you consider yourself risk-averse or are simply looking for a low-risk addition to your portfolio, blue chip stocks offer a good way to start investing.

Because blue chip companies are relatively stable, blue chip stocks are considered a low-risk investment. In all likelihood, no matter what happens tomorrow, the most established companies in the banking or real estate sector would not collapse overnight, so investing in them is a relatively safe bet. That doesn’t mean you don’t need to do your research and monitor your investments though!

You don’t need a lot of money to invest in blue chip stocks

Investing isn't just for "rich people"! You don't need to have a lot of money to start investing. In fact, it is a bad idea to wait until you do because you'd have wasted a lot of precious time during which your money could have been growing.

Investing in blue chip stocks is a great option for those who are just starting in their careers and may not be able to put aside too much.

For instance, a long-term plan such as the Blue Chip Investment Plan can be extremely beneficial when you’re young and have lots of time to grow your wealth. It enables you to start building a diversified portfolio of blue chip stocks with an affordable sum of as little as S$100 a month. This is inexpensive even if you’ve just started your very first full-time job. Investing in Singapore-listed blue chip shares and exchange-traded funds without the help of an investment plan would be prohibitively costly for many as you would have to buy in lot sizes of at least 100 shares of each company. With the Blue Chip Investment Plan however, you no longer have to worry about minimum lot sizes.

Blue Chip Investment Plans help you avoid emotional investing

Most budding investors tend to make the rookie mistake of trading based on market sentiment and end up buying high and selling low. As a beginning investor, you should be looking to invest for the long term rather than engaging in short-term speculation or trading.

Another benefit of the Blue Chip Investment Plan is that it’s an affordable way to invest using the dollar-cost averaging method. When you invest in this manner, you consistently invest a fixed sum of money at regular intervals no matter the cost of the asset. And in doing so, you can smooth out the effects of market fluctuations and spread out your risk. Overall, the Blue Chip Investment Plan is an affordable and stress-free way to grow your portfolio.

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