Skip to main content

Stop Blindly Buying Bluechip Shares and Open Your Eyes - Australian Investment Education

Bluechip Stocks: Avoid the trap of buying long-term holdings in companies purely because they have performed favourably in the past. When it comes to shares, history certainly does not have any guarantee to repeat itself.

Bluechip shares – what are they?

Wha they teach you at uni vs. what actually works in the real-world are two very different things. By definition, a Bluechip share is a company that has a long-standing history of good financial and operational management. And a strong history of successful leadership. In Australia, these are the large mammoths like Telstra, AMP or Woolworths which you have most likely come into contact with at some point in your lifetime.

These sound like a good investments, right? The problem is, past performance is no reliable guarantee of future performance – a misconception that many investors get horribly wrong. Quite simply, as host Andrew Baxter describes it, Bluechip shares are not always the safe place to be.

Your investment strategy should be like music

The investment landscape is one that is continually evolving over time. The trick is to have an investment strategy that does the same. If you think of it like music – once upon a time we only had vinyl records.

Then cassette tapes through to CD’s, and finally now streaming on Apple Watches and iPhones. As such, investment markets have changed in much the same way, meaning that the old adage of ‘just buy Bluechip and hold on’ simply will not work in these conditions any longer.

General Electric – a dwindling bemouth conglomerate

Let’s take General Electric as an example (NYSE:GE), here is a company with year in year out growth in profits, growth in dividends and an even larger reputation to follow. Their CEO, Jack Walsh, essentially led GE to becoming one of the cornerstone ‘Bluechip’ stocks in America, meeting every entry requirement possible. At their peak, GE traded at around $160, now the stock trades at just $10 meaning that if you had of started with $10,00 at the peak, that investment would now be worth just $625. An expensive loss for a company to seemed to be a safe holding spot with major Bluechip status.

AMP AND TELSTRA – Darlings to devils

If we dial it back to our own backyard and look at some household favourites of the Australian stock market, the first that may come to mind are Telstra (ASX:TLS) and AMP (ASX:AMP). Most Australians would argue that these are great businesses that embody the Bluechip status, having a long-standing history with profitable financial performance – however for anyone who has held these stocks for a long-period of time would certainly disagree. After hitting a peak of around $9, Telstra now trades at just $3.80 despite somewhat running a monopoly. AMP similarly, has drifted down from around $16 now to just $1.90. Yes these stocks tend to pay hefty dividends to their investors every 6 months or so, but has it come at the expense of the stock value?

Carving your niche

When certain companies operate in a niche setting and come along with good management, their share price will respond. These businesses may not typically be called ‘Bluechip’, but they sure as hell are performing better than some who are. Take Afterpay as an example (ASX:APT) as a unique business who owned their first-mover advantage. This is a company who has managed to drive its share price from $2.50 to around $35.  At its high in just a few years. A well driven and managed business that wouldn’t be classified as Bluechip. But one that certainly has carved its niche to cement it as an up-and-comer.

The outlook ahead

Just like music, investor sentiment has changed and so have their strategies. After seeing profoundly mammoth falls from companies like Telstra or General Electric, the idea of blindly buying Bluechip shares for the long-term is one that should be treated with caution.

As host Andrew Baxter sees it – we will begin to see some wholesale shifts in company activity to maintain the loyalty of their shareholders. Specifically, it’s about having a rock solid investment strategy to take advantage of these changes whilst adapting to new ones. For example, check out Andrews ‘Cash flow on demand’ strategy. With this, states Andrew, you are bound to stack the odds in your favour.

Labels:

Comments

Post a Comment

Popular posts from this blog

Understanding Interest Rate Cuts: How They Affect You, the Market, and Insights from Andrew Baxter

  Interest rates play a crucial role in shaping various facets of the economy, influencing loan costs, housing markets, and consumer spending patterns. Recent fluctuations in interest rates , particularly in countries like the United States and Australia, have sparked discussions about their potential impact on economic conditions in the near future. Analyzing Interest Rate Cuts: Benefits and Drawbacks Australia’s recent decision to reduce rates by 25 basis points marks the first cut in recent years, igniting significant debate over its implications. Homeowners with variable-rate mortgages stand to gain, but there are fears that the cut may be excessive. For mortgage holders, this decrease could facilitate faster debt repayment and enhance their ability to spend. Conversely, many Australians without mortgages may not experience any direct advantages from this change. On the downside, retirees who depend on interest income from bank deposits are likely to face reduced returns. Rate ...
Post a Comment
Read more

Success Secrets of Millionaires: Learn from Andrew Baxter's Habit Guide

  If you're aiming to build real wealth, discipline isn't optional—it's essential. Becoming a millionaire goes beyond buying stocks or investing in real estate. It starts with how you think, what you do daily, and how consistently you show up. Start With Discipline: The Foundation of Wealth Building Discipline is the core habit behind long-term success . It’s not about talent or luck—it’s about consistency. Most self-made millionaires developed their wealth by doing what needed to be done, even when it wasn’t easy or convenient. You don’t need to overhaul your entire life to become more disciplined. Start small. Make your bed. Keep your workspace clean. Exercise regularly. These micro-habits build the momentum needed for bigger changes down the road. Daily Habits Matter More Than Big Goals Real success doesn’t come from dramatic lifestyle shifts—it comes from small, intentional actions repeated daily. The key is to show up, follow through, and stay consistent. When discipl...
Post a Comment
Read more

Mastering Trading Psychology: Andrew Baxter’s Proven Habits for Rational Decision-Making

  Market volatility is a natural part of investing—but how you react to it can be the deciding factor between success and failure. Beyond data analysis and market trends lies a deeper driver of every trading decision: trading psychology . While many traders are equipped with technical skills and strategies, it’s emotional discipline that separates the average investor from a consistently successful one. The Impact of Emotions on Trading In periods of intense market movement, emotions like fear and greed often override rational thinking. This can lead to panic selling, chasing trends, or complete inaction. When emotions dominate, following a trading plan becomes difficult, and decision-making deteriorates. Successful traders understand how these emotional responses influence behavior. They know that even the best strategies can fail without the ability to manage psychological pressure. The Market Timing Myth Trying to perfectly time the market—buying at the lowest point and selling...
Post a Comment
Read more