Best-Performing Blue-Chip Stocks for Singapore Investors

Now, let's delve deeper into the world of blue chip investment in Singapore.

Blue chip stocks refer to large, reputable and financially sound companies listed on the stock market. More often than not, they are market leaders dominating the industry, having been around for years. They make a popular investment type for investors looking for stability, steady dividends and lower risk in their portfolios.

While there is no exact defining characteristic or checklist of criteria to define a stock as a blue chip, there are some commonalities you can find:

• Market leadership: As mentioned above, they tend to be market leaders in their respective industries and are included in leading, recognisable market indexes. In Singapore, the likes of DBS, Dairy Farm and CapitaLand will ring a bell. They are also all part of the Straits Times Index (STI) — an index that tracks the 30 largest companies on the Singapore Exchange (SGX).

• Longevity and financial stability: Unlike newly listed companies and penny stocks, blue chip stocks have been around for a long time, with strong balance sheets, healthy cash flows, and consistent earnings growth. They typically have a proven track record of weathering economic downturns and maintaining financial stability over time.

• Brand recognition: They are also well-known, household names that the man on the street will recognise. This brand equity provides a competitive advantage and contributes to their long-term stability.

• Regular dividends: More importantly, blue chip stocks typically pay regular dividends to their shareholders, gradually increasing over the years. This can provide a steady stream of passive income for investors. (Interested in increasing your dividends? Check out some of the top monthly dividend stocks to consider adding to your portfolio.)

You’ll need a brokerage account to start buying blue-chip stocks. Find out more about brokerage account fees and commissions.

>> Check out the best online brokerages in Singapore for stock trading

Blue chip stocks are known for rewarding their investors with attractive dividends, year after year. Whether it’s for a comfortable retirement, financial independence or other individual goals, investors looking to build a steady passive income stream by collecting dividends could find blue chip stocks to be a good choice to add to their portfolios.

If you’re an investor that prefers to invest in US stocks, that does not render Singapore blue chips irrelevant. Investing in local blue chips diversifies your portfolio and ensures you’re not overly exposed to a single stock, geography, industry or asset class. (Find out more about the fees to keep in mind when investing in different types of stocks.)

Finally, all investments come with a degree of risk and some are riskier than others. However, the size, financial stability, and long history of blue chip stocks has proven its mettle over the years. They’ve emerged stronger from market downturns and tumultuous times of the past like the Asian Financial Crisis and Great Recession to reward investors with steady dividends.

However, it’s worth noting that no sector or company is infallible or immune to market volatility. For example, no one could have predicted an event like COVID-19 could bring the entire aviation and travel sector to its knees in 2020.

» Check out how to buy stocks and shares in Singapore

Blue chip stocks are an appealing buy with their steady dividend payouts and particularly more so for Singapore blue chips because of the lack of dividend withholding tax.

However, while blue chip stocks offer stability and lower risk, it's crucial to diversify your investment portfolio beyond just blue chips. This helps spread risk and potentially enhance returns.

A common strategy for portfolio diversification in Singapore? Don't put all your eggs in one basket. Spread your investments across various sectors like banking, telecommunications, real estate, consumer goods, and healthcare.

Another option is to diversify further by combining blue chip stocks with Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) in your portfolio. ETFs offer exposure to a basket of stocks, while REITs provide access to the real estate market.

A uniquely local alternative is to invest in Regular Savings Plans (RSPs). Many banks offer RSPs that allow you to invest small amounts regularly in blue chip stocks from as low as S$100 a month. This can be a convenient way to build a diversified portfolio over time.

For example, you can use the OCBC Blue Chip Investment Plan (BCIP) to purchase counters such as OCBC, Singtel and CapitaMall Trust from S$100 a month. Similarly, you can also use the POEMS Share Builders Plan that allows investors to purchase counters including DBS, Sheng Siong and Netlink NBN Trust. If you already have in mind the blue chip stocks you wish to purchase, be sure to check the list of counters available before you start the RSP.

Besides investing in blue chip stocks, there are also other ways for investors to grow their wealth. You can consider investing in REITs, ETFs, unit trusts and more. Read more stories on investing here. 

» Keen to explore more ways to invest in Singapore? Find out how to pick the best mutual funds in Singapore to invest in.