Should you Invest in blue-chip or penny stocks? Think!
The stock market is a vast place to invest in. There are so many companies to choose from, so much to grasp while making an investment decision, and constant inconsistencies to follow. But the constant bafflement lies between the choice between Blue-Chip Stocks and Penny stocks.
Before we give you insights to help you make your choice between Blue Chip Stocks and Penney Stocks, let us understand the difference between them:
Blue-chip stocks
Reputed stocks that have been in the market for a long time. They are companies that have a reputation for quality, reliability and have given high profits over time.
Penny stocks
Stocks that trade at a low price. These companies’ prices under Rs.50 could relatively be new to the market. Companies with lower market capitalization rates mainly offer these reserves.
Benefits of Blue Chip stock investments
Blue Chip stocks have been in the market for a longer comparable period and give steady returns because of their reputation.
They have lower risks associated with them. Blue Chip stock investors usually expect regular and stable Returns on investment. They also have high liquidity.
Drawbacks of Blue Chip stockinvestments
Because these companies have been in the market for an extended period, these stocks may be expensive.
Blue-chip stocks are not suitable for short-term investments. Most blue-chip companies are at their stable and mature face of growth. Hence their future growth is not as fast. Their stock prices may rise slowly because of their existing development and reputation, resulting in lower returns.
Benefits of Penny stock investments
Most of these companies have a massive potential for growth, which results in high returns over a longer period.
These can also turn out to be Multibaggers, i.e., give 10x returns, if identified correctly. Because their prices are low, you can buy a substantial amount of penny stocks and significantly diversify your portfolio.
Drawbacks of Penny stock investments
There are many risks involved with investing in penny stocks. It could be challenging to identify the right stocks for you in this margin due to a lack of information related to these stocks and very high volatility.
These stocks have lower liquidity which makes it difficult for their holders to cash out. The artificial inflation of share prices could lead to false statements regarding the company’s situation, leading to fraud.
