Heard they can be less risky
"Blue Chip" is a very subjective term to describe a company or its stock. And with reference to your comment that you've "heard they can be less risky," I would ask you what you're comparing them to? Less risky than what?
It's my opinion that all stocks are risky, and since no once can predict what will happen with the market or the companies that comprise the market, there really is no such thing as a "blue chip" stock. Sure, in hindsight, it may appear that some companies and their stocks are riskier than others, but the future is uncertain and I would caution you to consider all stocks equally risky.
If you want to lessen your risk, your should increase diversification across both stocks and bonds. I recommend my clients invest their portfolio in a mixture of total market stock funds (domestic and international) along with high quality intermediate term bonds.
Good luck to you, Paul.
Paul - blue chip stocks are stocks of typically large-cap companies with a long history of consistent earnings growth and consistent dividend payments. Examples could include 3M, Chubb, CR Bard, and Coca-Cola, all of whom are members of the S&P 500 Dividend Aristocrats. "Risk" can be defined in a number of ways, so while they may be less "risky" than some stocks, investing in blue chip stocks still has risk. Consider your own risk tolerance and investment objectives before investing in any stock.
Paul do you mean companies which used to be Blue Chip stocks?
This may seem like a lazy answer but it is one of the most interesting answers I've ever found -- From Wikipedia:
According to the New York Stock Exchange, a blue chip is stock in a corporation with a national reputation for quality, reliability and the ability to operate profitably in good times and bad. The most popular index which follows US blue chips is the Dow Jones Industrial Average. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
As befits the high-risk nature of stock picking, "blue chip" derives from poker. The simplest sets of poker betting discs include white, red, and blue chips, with tradition dictating that the blues are highest in value. If a white chip is worth $1, a red is usually worth $5, and a blue $10. The etymology may come from the color's royal lineage—an aristocrat is known as a "blue blood". Blue blood is a translation of the Spanish phrase sangre azul, which described the Spanish royal family and other high nobility who claimed to be of Visigothic descent, in contrast to the Moors.
The phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company folklore recounts that the term apparently got its start when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at US$200 or US$250 a share or more, he said to Lucien Hooper of W.E. Hutton & Co. that he intended to return to the office to "write about these blue-chip stocks." Thus the phrase was born. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks.
In contemporary media, Blue Chips and their daily performances are frequently mentioned alongside other economic averages like the Dow Jones Industrial Average.
I've never considered 'Blue Chips' safer than any other large company. Back in the mid-90s, GE was considered `safe' by a lot of people, including GE retirees who had their life savings in the 'company stock', when the bottom fell out and it was decimated. We've also seen 'blue chips' that became penny stocks almost overnight during the credit meltdown. The key to success lies less in stock selection than it does in having a solid plan, a good asset allocation that fits your long-term goals, and the investment disclipine to 'tune-out' the white noise of investment 'opportunities'.
Thanks for your question.... Good luck!