Blue chip stocks are huge companies with great reputations, often including some of the most famous companies.
Investors turn to blue chip stocks because they have solid financial performance and often pay dividends.
There is an opinion among investors that “blue chips” can survive a variety of market challenges; while this may be largely true, it is not a guarantee. For this reason, it is very important to diversify your portfolio beyond just blue chip stocks.
The Greater Fool Theory states that you can make money buying overpriced securities because there will usually be someone (i.e. a bigger fool) who is willing to pay an even higher price.
“Eventually, when the market runs out of fools, prices will start to go down.