One of the longest-accepted pieces of advice has been that investing in blue chips will secure long-term wealth for your portfolio and your family. Most blue chips have been good investments over the past 20 years.
Australia has three main groups of blue chips. One group is the big banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australian Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Macquarie Group Ltd (ASX: MQG).
The second group is retail-related shares like Wesfarmers Ltd (ASX: WES), Woolworths Limited (ASX: WOW) and Scentre Group (ASX: SCG).
The third group is resource shares like BHP Billiton Limited (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Woodside Petroleum Limited (ASX: WPL) and South32 Ltd (ASX: S32).
There are also shares in individual industries that are in the ASX20 like Telstra Corporation Ltd (ASX: TLS), CSL Limited (ASX: CSL) and Transurban Group (ASX: TCL).
These are all recognisable names and are huge businesses in Australia. Most of them have been good investments if you're a long-term shareholder.
The problem I see is that because they already dominate the industries they're in, so there is little potential growth on offer beyond population growth. It would be hard for the big four banks, Woolworths or Telstra to increase their market share much higher.
The other big problem I see is that there are competitors looking to steal their market share. Amazon and other online retailers could really hurt Wesfarmers and Woolworths in the long run. The banking commission, regulators and the general housing market could hurt the big banks. The NBN is hurting Telstra. Renewable energy could hurt BHP and Woodside in the long-term.
Foolish takeaway
There is little 'upside' and a lot of 'downside' to most of these blue chip shares. They're not all bad, indeed I think Macquarie and CSL are excellent businesses and have good growth prospects for the next decade. However, for the best chance of market-beating returns, or even just good returns, I'll be avoiding the rest of the blue chips.
