GROWTH STOCKS VS BLUE CHIP STOCKS 📈 #Best Education Page #Online Earning

so today we're going to be talking about

the difference between blue chip stocks

and growth stocks so I have a lot of

people who are frequently asking me

questions like how do I determine what's

a blue chip stock how do I determine

what a growth stock is and it's kind of

a difficult question because like my

favorite brand of adult diapers it

depends okay I had to get that out there

I'm sorry I thought of that while I was

writing this up here on the board and I

know you guys are going to kill me for

that really bad joke but anyways let's

talk about this guy's so there's no set

rules out there or there's no set

official list of blue chip stocks out

there what many people follow is the Dow

Jones Industrial Average of the Dow 30

which are 30 very good companies that

have been around for a long time and the

list does change once in a while but

many people look at those as examples of

blue chip stocks but there are other

stocks out there that many would

consider a blue chip stock based on

their market capitalization or their

dividend history that may not be on the

Dow Jones Industrial Average so it

really does depend so you kind of have

to look around and do your own research

but what I'm going to show you guys are

the basic characteristics of some growth

stocks as well as the characteristics of

blue chip stocks so maybe you guys can

get a better idea when you're looking at

a stock whether it's a growth stock or

whether it's more of a blue chip stock

so here's one question I get a lot -

people ask what is better should I

invest in blue chip stocks or should I

invest in growth stocks so by the sound

of it many people look at blue chip

stocks is kind of a safer slower-growing

investment and many people associate a

growth stock with growth and they think

that they're going to have a better

return on their investment so let's look

at an example right here so first of all

we have a vanguard growth index fund if

you guys search for this you can get

this just by searching for I had the

stock symbol but I forgot to put it down

here and we're going to compare that to

the Dow Jones Industrial Average which

as we said is a collection of 30

companies that most would consider to be

blue chip companies or blue chip stocks

so the answer is it does depend on what

the market is doing so if we look at

this right here over the last three

months the Vanguard growth index fund

has returned 4% while the Dow Jones

Industrial Average has returned eight

point seven percent so over the last

three months blue chip stocks have

outperformed over the last year the

Vanguard growth index fund has returned

fifteen point nine percent while the Dow

Jones Industrial Average has returned

twenty three percent so over the last

year blue chip stocks performed better

however over the last five years this

Vanguard growth index fund has returned

eighty five point seven percent while

the Dow Jones Industrial Average has

returned only 67 point two so over the

last five years growth stocks were

better however over the last year the

blue chip stocks outperformed so it

depends on the market so many people use

the strategy of having a blend of growth

stocks as well as blue chip stocks and

their portfolio because each outperform

each other at different times so I just

kind of wanted to show that to you guys

I know a lot of people go and they say

oh you know you got to invest in growth

stocks for a better return however if

you're someone who just started

investing a year ago you would have seen

a much better return from blue chips

than you would growth stocks if you were

looking at index button so don't always

assume that growth stocks are going to

give you a better return typically they

do because smaller companies grow faster

and we're going to talk about that in a

second as far as characteristics of

growth stocks but understand that it

depends on the market and there are

times that the blue chip stocks and the

larger companies are outperforming the

smaller companies as far as stock price

goes so first of all let's identify what

a growth stock is so a growth stock is a

company increasing in capital value

they're grown company their earnings are

expected to grow at a faster rate than

the market so what does that mean that

means that the earnings are going to

grow faster than companies of the same

industry or of the market overall so if

you were looking at a company that was

in a certain sector let's say you're

looking at semiconductors you would

expect this stock to have earnings

growing faster than that sector average

or faster than other companies within

that sector so here's a couple of

examples of some growth stocks we have

cirrus logic we have Zillow we have

Facebook now many people may look at

Facebook and say well based on market

capitalization I'm going to call that a

blue chip stock so this is kind of where

we get into the gray area where people

could kind of call that either one

because there's no set rules or set

lists out there but based on their

growth

would call Facebook of growth stock

despite them being so large so what are

you looking for with a growth stock well

the first thing you look at is the

growth rate the best way to look at that

is the historical five-year growth and

they projected five-year growth okay big

companies do not grow as fast as small

ones so if you're someone looking for

stocks so looking for stocks to invest

in here's just some set guidelines of

what you might want to look for if

you're looking at a smaller company

because you're expecting them to have

more rapid growth you want to see 10 to

12 percent historical growth and 10 to

12 percent five-year projected growth so

this kind of shows that this is a grown

company and you also want to see future

growth being at a higher rate than the

previous or the historical growth so you

want to see that they're growing faster

now than they were over the last five

years now because larger companies grow

at a slower rate you might want to see

five to eight percent historical growth

and then five to eight percent

anticipated growth over the next five

years again you do want to see a company

growing faster than it was in the

previous five years if you're looking

for certain things within an investment

if you have a you know a checklist of

some kind that's one thing I like to see

then we look at return on equity so this

is basically how well a company uses

investment to generate earnings growth

if you want to learn more about this

stuff here I did a whole video recently

on how to value a stock I talked about

all these different things and I believe

I talked about six different indicators

that I look at as far as valuing a stock

so if this stuff interests you guys I

will link up that video at the end I

highly recommend you check that out but

this is like we said how well a company

uses investments to generate earnings

growth so here's what I look for in a

stock seventeen to twenty percent return

on equity is very good 20 to 25 percent

is excellent and anything above 25

percent is superior so a minimum of 17

percent is what I like to see you may

have your own set number there that

you're looking for but you want to see

that they're having a good return on

equity you want to see that they're

using money from investments wisely you

don't want to see a low return on equity

because that means they're not using the

money very effectively they're not

getting much of a return for it another

thing you can look at is earnings per

share so our sales resulting in earnings

may be their sales are rising but their

earnings per share are remaining flat

you're going to want to see earnings

keeping up with sales you want to see

them making more money as well as

keeping more money in earnings you also

want to look at profit margins and you

want to see that profit margins are

growing and another thing to look at is

the industry average so what is the

average return so as far as a company on

their sales what are they making and

earnings so you want to look at things

like that and make sure they're earning

as much as other companies within that

industry another thing to mention is

this so if you're looking for a growth

stock and you're looking at things like

return on equity or earnings per share

or growth rate and you're looking at a

company that had a recent IPO you're not

going to see these things so you can't

strictly look at this you have to look

at every company individually so if a

company had a recent IPO and they just

went public

they have no operating history so you're

not going to see them on these metrics

but that could still be considered a

growth stock all right so now let's talk

about a blue-chip stock and again guys I

did a whole video talking about blue

chip stocks about a month ago so if you

want to learn more about that I have a

ton of videos on my channel if you guys

are new make sure you guys subscribe

because I put out a ton of videos like

this just talking about different topics

involving the stock market but a blue

chip stock is a stock of a

well-established stable and financially

responsible company and their earnings

and revenue grow at or below the market

average as we said before larger

companies do not grow as fast as smaller

ones and the blue chip stocks these are

the biggest of the big these are the

largest companies these are the titans

of the industry because they're so large

there's no way they could grow as fast

at these smaller companies because

they're so well-established already

here's a few examples of some blue chip

stocks we have IBM Microsoft coca-cola

and Visa the number one thing to look

for with blue chip stocks to identify

them I look at market capitalization you

want to see a company with a market

capitalization of 100 billion dollars or

more another thing to look at is the

dividend payments to shareholders most

blue chip stocks because they're not

growing as fast what they do is they pay

dividends to shareholders so they

basically take their earnings and they

give a portion of those earnings to the

shareholders because the stock is not

going to increase as much in some cases

as the stocks of these smaller companies

however if we look at the recent year

they've increased at a greater rate than

some of these

smaller companies but anyway what they

do is they pay dividends to shareholders

so this is another way that you can get

a return from blue chip stocks so not

only do you want to look at whether or

not they are paying dividends you want

to see a history of rising dividends and

you also want to see how long they've

been paying dividends and if they've

ever got rid of the dividend temporarily

or eliminated dividends in the past so

you want to look at their dividend

history that's very important as far as

you know looking at blue chip stocks and

deciding on a good investment but as far

as characteristics go you know large

market capitalization and dividend

payments are two very big signs that

this would be a blue chip company then

we have a long-standing and time-tested

so you want to make sure this is a

company that's been around for a long

time this may be why you might not

consider Facebook to be a blue chip

stock because they had a recent IPO we

despite the fact that they have such a

large market capitalization they haven't

been around a long time they're not a

time-tested company so that's why you

might not see a company like Facebook on

the Dow Jones Industrial Average because

these are well established companies

that have been around for a long time

another thing to look at is whether it's

the leader or the top three of the

industry which I'm sure as you guys can

figure Facebook meet that criteria but

it may not meet some of these other

criteria here so again this is where we

get into that gray area of what you

consider a blue chip stock to be because

there's no official list out there but

this is what you're going to be looking

for if you're someone out there looking

at a stock and you're trying to

determine whether it's a growth stock or

a blue chip stock look at things like

market capitalization how fast they're

growing compared to stocks within the

sector are they paying dividends and

this is how you can determine whether

you're looking at a blue chip stock or a

growth stock and like I said as we

looked at with this example here

historically at some times you know the

blue chip stocks outperform the growth

stocks and at other times the growth

stocks outperform those blue chips so a

blend is actually a good strategy within

your portfolio but I just kind of wanted

to clarify this because I get a lot of

people asking about this so if you guys

enjoyed this video please drop a like

and if you are new to my channel please

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any future uploads and as always I thank

you for taking the time to watch this

video

you

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