The World's Best Blue Chips

When I think of blue-chip stocks, I think of Woody Hayes' three yards and a cloud of dust. In other words, I assume that a blue chip will provide a steady gain without too much risk. I'm not, however, expecting stratospheric returns.

So I was surprised at the recent returns for some of the world's best blue chips when I saw them in The Wall Street Journal. The following list consists of some of the largest and best known companies in the world.

This table provides us with some valuable insights. First, during this period, an investor could have outperformed the market with below-market levels of risk by selecting large but outstanding companies. Second, an investor could have earned impressive returns by choosing either American or international blue-chip stocks. This last point is very important and is worth exploring further.

Managing risk
Obviously, you could earn great returns by only investing in American stocks. The problem with such a strategy, however, is that you would be forgoing the very real diversification benefits of holding a percentage of your portfolio in international equities. By investing in international blue chips, you can obtain the security of owning a stake in a solid and stable enterprise while reducing the volatility of your portfolio.

No doubt, there are considerable risks associated with international investing, but many of these risks are overstated. Quite a few European and Asian countries, for example, are just as stable, if not even more so, than the United States. And many of these countries have equally effective regulatory bodies watching over their markets as well.

How much is a krona worth?
There are some real challenges to investing even in relatively safe international stocks, however. Different currencies and financial-reporting requirements make it tougher to analyze a company. We all know that mistakes here can be costly. And the "foreignness" of foreign markets makes it less likely that investors will be alert to meaningful news stories and scuttlebutt on their particular companies. So tread carefully.

Or, if you'd like a guide, check out Global Gains, the Fool investment service devoted to uncovering great international stocks. As long as it's foreign and a good value, Bill Mann and his team of analysts will take a look. You can peek at all of our picks, our favorite international stocks for right now, our country-by-country analyses, and our global-investing special report, for free with a 30-day trial.

Today's a good day to try Global Gains: A brand-new issue, with two new international stock ideas, releases at 4 p.m. ET. Click here to get started.

John Reeves owns shares in Procter & Gamble. He lived in London for seven years and has a picture of himself holding the FA Cup. Total SA and Bank of America are Motley Fool Income Investor recommendations. The Fool has a disclosure policy.