Friends, today we have come with a banging topic and the topic is Blue Chip Stocks or Penny Stocks Which is More Profitable? In this article we will discuss about blue chip stocks and penny stocks in details. To invest in the stock market, it is very important to understand the difference between blue chip stocks and penny stocks. Both stocks are different in nature and main objective so let us try to understand the difference between blue chip stocks and penny stocks.
What is Blue Chip Stocks and Penny Stocks?
We can determine whether a company\’s stock is a blue chip stock or a penny stock from the company\’s performance, stability and earnings. Based on the company\’s past data and current stability, we can determine the type of stock.
Blue chip stocks are stocks of companies whose business is very stable and this company has been in profit for the last ten consecutive years. The market cap of such a company is very high and they are working steadily in the sector.
Penny stocks are stocks of companies whose market cap is very low and such stocks are priced from 5 to 50 rupees. Stocks of small companies can be called penny stocks and the profit and performance of such companies are not stable so investing in penny stocks can be risky.
Let us discuss penny stocks and blue chip stocks separately in depth.
Also read: What is PE and PB Ratio? | PE vs PB Ratio Difference Explained
What is Blue Chip Stocks?
If a company is making a good amount of profit for the last ten years, the market cap of the company is good, the company is dominant in its sector, then we can call that stock a blue chip stock. Blue chip companies are included in major indices of stock exchanges.
Investing in blue chip stocks offers lower risk owing to their robust business stability. In many cases, the company also gives good amount of dividend.
If we talk about the example of blue chip stock, then it has big company names like Indian oil Corporation Ltd, Reliance, Tata Motors, TCS, HDFC Bank, Bajaj, SBI Bank, ICICI Bank, ITC, Infosys, M&M, ONGC, IRFC, L&T, etc.
Also read: Is Tata Motors Good For Long Term Investment?
What is Penny Stocks?
Referring to penny stocks, these are stocks of companies characterized by low market capitalization. As the company’s progress and profits are not stable, so their stock prices are low. Such penny stocks do not show any participation in any significant indices in the stock exchange
Investing in penny stocks is very risky as these companies do not show steady progress and such stocks tend to go down in financial risks. On the positive side, since the company’s stock price is low, there is a lot of potential to make a profit, that’s why it is often seen that suddenly the company’s stock price increases a lot.
If we talk about the example of blue chip stock, then it has small company names like Reliance Home Finance Ltd, Indian Infotech & Software Ltd, Vikas Ecotech Ltd, FCS Software Solution Ltd, Tilak Ventures Ltd, Vivanta Industries Ltd, Future Retail Ltd, etc.
Also Read: Should I Hold The Shares of Tata For a Long Time in 2024?
Blue Chip Stocks vs Penny Stocks
Price and Market Cap
| Blue Chip Stocks | Penny Stock |
|---|---|
| High valuation because of high brand value and consistent profit | Low valuation because of low brand value and instability in profit |
| Expansive stocks | Low priced |
| Market cap is high | Market cap is lower |
Also read: Is Groww App Better or Upstox for Investing as a Student?
Trading Volume
| Blue Chip Stocks | Penny Stock |
|---|---|
| High demand resulting in high volumes | Low demand resulting in low volumes |
| Highly liquid stocks | stocks are illiquid |
| As a result, can be bought and sold anytime | Buying and selling these stocks is challenging |
Also read: Is Upstox Application Good for Option Trading in India?
Level of Risk
| Blue Chip Stocks | Penny Stock |
|---|---|
| High profitability and strong income | Weak fundamentals and instability in income |
| Can withstand economic shocks easily | Cave in during economic crisis |
| Secure investment | Risky investment |
Also read: Zodiac Energy Share Price Target 2025 to 2030
Potential to Face Shocks
| Blue Chip Stocks | Penny Stock |
|---|---|
| Mostly stable and do not fall significantly in a falling market | They have a lower capacity to withstand volatility and can fall face down in a falling market |
| Lower volatility and risk | High volatility and risk |
| Suitable for long-term investment | Suitable for short-term investment |
| Suitable for investors with low-risk appetite | Suitable for investors with high-risk appetite |
Also Read
- Vivanta Industries Share Price Target 2025, 2026, 2027, 2030 & 2040
- IRB Infra Share Price Target 2024, 2025, 2026, 2027, 2030
- Reliance Home Finance Share Price Target 2024, 2025, 2026 and 2030
Conclusion
We saw the difference between penny stocks and blue chip stocks in the above article. We have compared both the stocks through many parameters and tried to understand in simple language. In conclusion, while penny stocks may offer higher potential returns in the short term, they come with greater risk and volatility. Blue chip stocks, on the other hand, provide stability and are less prone to market fluctuations, making them a preferred choice for conservative investors looking for reliable long-term investments.
FAQs
Is Tata Motors a blue chip stock?
Yes, Tata Motors is a company with a large market cap and is also famous in the market as a big brand. The company has been showing good profits for quite some time now and its growth is also moving forward with a stability due to which we can call it a blue chip stock.
Is ITC a blue chip?
Yes, TCS is the company with the largest market cap of the Tata Group and is also included among the top companies in India. TCS Company has a prominent position in the IT sector and enjoys a very good stability so that it can be placed in the list of blue chip stocks.
Is Tata Steel a blue chip company?
Yes, Tata Steel is an old and reputed company and there is a stability in its growth. The market cap of the company is also very high so that it can be placed in the blue chip stock list.
Is RHFL a penny stock?
Yes, The share price of the RHFL company is very low at present and the company has been operating at a loss for a long time and the company does not have a good image in the market. Investing in such a company is very risky.
