New Delhi: If you have interest in investing in shares then you must have heard about the Regular/ Blue Chips Stocks and Penny Stocks. Though these are separated by name but eventually these are stocks with their own advantages and disadvantages. You can invest in these both stocks. Let's understand these two in more detail.
Let's look at their definition first and in later part of this write up we will extract out more details about these two stocks.
Any stocks whose price is low in the markets are known as penny stocks. The price of such stocks could be less than Rs 50 which generally attracts investors but the risk is equal high. But what you get to learn from the definition, it doesn't mean that this is the only criteria. These shares should be avoided if the company is in a bad condition.
These stocks are illiquid and are not popular among investors. Researching and analyzing on these stocks are also very difficult as less information is available.
However, such stocks can turn multibaggers giving huge returns to investors in a short time period of time.
These stocks can hit higher circuit in their trade frequently because trading in these stocks is less.
However, if one succeeded to find such stock with good fundamentals and if he purchases it at extremely low valuations then in that case he will not regret.
For example, Flomic Global Logistics, Adinath Textiles, Tata Teleservices, Brightcom Group, Waaree Renewable Technologies, RattanIndia Infrastructure, Ganesh Housing, Reliance Power, HFCL and CG Power
Regular stocks are also considered as blue chips stocks. Blue chips companies provide safety in volatile markets. Out of these, the best ones also offer promising growth prospects apart from offering an attractive combination of moderate p/e's (the ratio of a stock's price per share to its per-share earnings).
Blue chips companies are those companies which have a record of consistently strong performance in the stock market. Their shares do not fall much and they are financially very strong. Even if there is a loan, it does not affect their profit making.
These are not affected by the ups and downs of the stock market, due to which the risk of losing the money of the shareholders is very less as compare to penny stocks which is very risky.
Often these companies are old and have a large market cap and are known as leading companies in their respective sectors. Their products have a very good recognition and penetration in the market and among the consumers. In general, they manage to pass on profits to their shareholders.
For example, Reliance Industries in India, Hindustan Unilever, State Bank of India, Tata Consultancy Services, Infosys, ICICI Bank, HDFC Bank, Maruti Auto, ITC Limited, Asian Paints etc. Globally we can name Apple, Google, Microsoft, IBM, Intel, General Electric, McDonald Coca-Cola, PepsiCo, Walmart, Johnson & Johnson, Walt Disney, Procter & Gamble, Berkshire Hathaway and so on.
| Blue Chips Stocks | Penny Stocks | |
| Risk Level | Low | High |
| Dividend | Low | High |
| Volatility | Low | High |
| Investment option | Long term | Short term |
| Efforts Required in Research | Low | High |
| Liquidity | Low | High |
| Market Capitalization | High | Low |
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