Cyborg AnimalsA Few Good Penny Stocks or Blue Chips?
There are several differences between a penny stock and a blue chip stock. One option offers a very small amount of capital while the other is quite established and is very reliable. Both stocks are worth considering; and both should be something that should be included in an investor’s portfolio though in varied proportions according to your investment goals.
Penny Stocks
What is a penny stock, you might ask. Penny stocks are items that are commonly sold via either new or small companies that are often still in growth mode or could be progressively moving down. These stocks most commonly sell for less than one dollar. Companies that provide these stocks often have a small amount of capitalization, which means that it is quite possible for the company to lose everything they have and go bankrupt. But, do not let that scare you. This particular stage in the company is also one in which the business could skyrocket if the correct funding is provided and management make sound decisions. This fact is why many investors often look for a few good penny stocks to balance out their relatively conservative portfolio.
Blue Chip Stocks
Blue chip stocks are provided by extremely well-established businesses who are the owners of significant amounts of capitalization and have a record of accomplishment. In order to determine which companies fall into this category and which ones would be the best choices to invest in, Dow Jones provides a list of the top thirty companies in the United States and companies can also be tracked by using the industrial average also provided by Dow Jones. These stocks commonly sell for at least ten dollars; but are often worth much more.
Although both types of stocks should be considered in an investor’s portfolio, it is obvious that penny stocks are riskier than other stocks. This is the reason that investors choose to go with an small-cap index fund which provides excellent growth without the risk. If you do buy penny stocks, it is possible to earn a great deal of money in a short period of time because they can double or triple their value in just one trading session. Although this increase in value is something that would intrigue almost anyone, there may also be significant risks involved, so this should be approached cautiously.
Penny stocks have been proven to be the most risky of all the investment options, which is why most investors typically avoid becoming involved in them. However, penny stocks can be a vital aspect of a portfolio, especially for young investors who have a significant amount of time to use for growth. More mature investors, however, will not typically choose to invest in a penny stock because they are more interested in stability rather than growth.
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