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What are Australia’s blue chip shares?

We explain why investing in blue chip stocks can be a good strategy.

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If you're interested in investing in the stock market, you've probably come across the term 'blue chip' stocks. You may be wondering what they are and how you can invest in them.

The term is a little vague, but generally speaking blue chip stocks are major listed companies that have had a good financial track record spanning many years. These kinds of companies tend to be safer and less volatile than other stocks and often pay a dividend.

During a stock market crash, a recession or market volatility, you'll often hear analysts suggest blue chip stocks to buy. The reasoning here is that major companies are more likely to weather a storm and hence their impacted share prices are expected to rise again after the crisis ends.

What are blue chip shares?

Some of the typical characteristics of a blue chip company includes:

    • Large company
    • Good financial track record
    • Older companies
    • Pays dividends

List of ASX blue chip shares


Source: S&P/ASX20 index

What are Australia's blue chip shares?

There's no official list of 'blue chip' stocks – the closest we have is the list of companies on the S&P/ASX 50 index, a list of Australia's top 50 companies by market capitalisation. It includes companies with a history of providing steady returns and minimal volatility to investors. These companies are spread across a range of market sectors, including:

Banking and financial services

Companies in Australia's financial sector make up a large portion of the top 50 stocks. These companies tend to have a history of providing large dividends and include AMP and the Big Four banks: CommBank, Westpac, ANZ and NAB.

Resources sector

As mining is a cyclical industry, resources companies have the potential to provide high capital growth, at the same time have a reputation for underperforming when the mining industry experiences a downturn. Having said that, companies such as BHP Billiton, Woodside Petroleum and Rio Tinto all feature in the S&P/ASX 50.

Retail sector

Retailers tend to offer medium-sized dividends to shareholders, and Woolworths, Coles and Wesfarmers are popular choices among investors.

Should you invest in blue chips or small caps?

While blue chip stocks tend to be a safer investment, they don't usually rise considerably in value over a short-time frame unless you can scoop them up at a discount during a downturn. This means that blue chips are long-term investments or used to provide an ongoing incoming through dividends.

Those looking to make a quick buck by striking it lucky invest in riskier but smaller companies called 'small-caps'. When you invest in a small company you're betting that it will be the next big thing and turn that pocket money into millions.

It can be tempting to take a punt on speculative companies. These are companies that do not have a long, well-established history of providing stable returns to investors. They’re also typically located outside the list of the top 100 companies in Australia. These are sometimes called 'growth stocks' and the smallest are penny stocks – those that trade at less than $5 per share.

Blue chip stocks vs penny stocks

Blue chip stocks. A blue chip stock is usually an older, well-established company that has a reliable history of weathering against tough times and of growing profits. Examples include: BHP, CBA, Telstra and CSL.

Penny stocks. Penny stocks tend to trade for less than $5 and are also called micro-cap stocks or small-cap stocks. The idea is to buy them for a low price with the promise of big profits later. They're generally riskier, speculative stocks.

The benefits of dividends

There are two ways to earn money from shares. Not only can you benefit from capital growth in the value of shares over time, but you can also earn an income from dividends and any additional franking credits. Dividends are more often paid out by blue chip stocks, which is part of what makes them so attractive.

A dividend is a company’s way of distributing its profits to shareholders. Many companies listed on the ASX pay dividends twice a year, including a smaller “interim” dividend and a larger “final” dividend. However, not all companies pay dividends to shareholders, and will instead invest all of their profits back into the company.

Dividends tend to be paid by larger, well-established companies on the ASX and you can use them to provide a regular, ongoing source of income. This offers you security and stability for the future, while at the same time giving you a chance to benefit from the company’s long-term capital growth.

How to buy blue chip shares in Australia

  1. Choose a share trading platform. If you’re a beginner, our table below can help you choose.
  2. Open your account. You’ll need your ID, bank details and tax file number (TFN).
  3. Confirm your payment details. You’ll need to fund your account with a bank transfer, debit card or credit card.
  4. Find the shares you want to buy. Search the platform and buy your shares. It's that simple.

Compare share trading platforms to buy blue chip stocks

Data indicated here is updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
IG Share Trading
Finder Award
IG Share Trading
AUD 8
AUD 50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares, Forex, CFDs, Margin trading
Yes
Brokerage discount: $5 on Australian shares for active traders & $0 commission on US and global shares
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.
eToro Share Trading (US stocks)
USD 0
USD 10 per month if there’s been no login for 12 months
Forex, CFDs, US shares
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and forex from the one account.
Superhero share trading
AUD 5
No
ASX shares
No
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
CMC Markets Stockbroking
AUD 11
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, mFunds
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.
SelfWealth Share Trading (Basic account)
AUD 9.5
AUD 0
ASX shares
No
Trade ASX-listed shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
ANZ Share Investing
AUD 19.95
No
ASX shares, Global shares, Margin trading, Options trading
Yes
Earn 1 Qantas Point per AU$3 spent on brokerage fees on certain instruments.
Access Morningstar reports, company announcements and and live pricing via ANZ’s share investing platform. Available for desktop and mobile.
Westpac Online Investing Account
AUD 19.95
AUD 63.50 per year on the global markets account
ASX shares, Global shares, Options trading, US shares
Yes
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares.

Tips when choosing stocks

Make a plan

  • Before you start buying or selling shares, consider exactly what you want to achieve with your share portfolio and in what timeframe. Once you have a plan in place you can then choose your investments accordingly.

Don’t panic

  • Share markets fluctuate all the time – look at historical graphs charting the performance of the ASX for proof of this – so don’t panic at the first sign of share prices heading south. Stick to your plan and ride out any dips or down periods.

Consider your investment goals

  • Are you looking for shares to provide capital growth or to generate income? Smaller companies tend to focus more on growth and therefore reinvest profits into their business, while larger companies tend to pay dividends to their shareholders.

Don’t forget about dividends

  • Dividends can provide a stable source of ongoing income during uncertain financial times. Look at companies with a history of paying high dividends to shareholders to see whether they could provide an attractive investment option for you.

Choose companies wisely

  • Blue-chip stocks, also known as large-cap companies, tend to offer secure, stable returns and a minimal level of risk. Smaller companies outside the top 50 or 100 companies on the ASX may provide larger growth potential, but they also come with a much higher level of risk attached.

Research before you buy

  • Looking at a company’s annual reports, earnings and historical performance will help you form a clearer picture of whether it is a sound investment. If you’re using an online share trading platform, you may also be able to access research reports and buy or sell recommendations for various companies.

Know what long-term means

  • In order to ride out any periods of market volatility and enjoy the maximum returns, you typically need to look at an investment time frame of 7 to 10 years when choosing shares.

Consider other investment options

  • Depending on your investment goals and appetite for risk, you may also want to consider other options, such as exchange traded funds (ETFs). ETFs are bought and sold on the ASX just like shares, but they allow you to gain exposure to a share index or other group of underlying assets.


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