What is the 'Blue-Chip Index'

The blue-chip index is a stock index that tracks the shares of the top-performing publicly traded companies. Blue-chip stocks represent companies that are financially stable, well established and provide good returns for investors, making them desirable investments. Because blue-chip companies tend to perform similarly to the economy as a whole, the performance of a blue-chip index may be considered a gauge of an industry's or region's economic strength. It is for this reason that news reports typically mention how a major blue-chip stock index, such as the Dow Jones Industrial Average (DIJA), performed that day.

BREAKING DOWN 'Blue-Chip Index'

Rather than selecting individual stocks, an investor can gain exposure to a variety of blue-chip stocks by purchasing shares of an exchange-traded fund or index fund that tracks a blue-chip index. Besides the DJIA, other examples of blue-chip indexes include the NTX, which tracks 30 of the top stocks traded in central, eastern and southeastern Europe, and the DAX, which tracks the top 30 companies on the Frankfurt Stock Exchange.

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  4. What is the benefit of investing in blue chip stocks?

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