Blue Chip Stock

A blue chip stock is shares of a large, well-established, financially sound company with a long history of reliable performance, often (though not always) paying a dividend. The term borrows from poker, where the blue chip carries the highest value at the table.

Blue chips are not a formal legal category, just a widely-used shorthand for the largest, most stable names in an index: think Johnson & Johnson, Coca-Cola, or Microsoft. They tend to fall less than the broad market in downturns and rally less than speculative names in a bull market, trading some upside for stability.