What is the definition of Penny stocks?

The stocks which have low market pricing can be called Penny stocks. This kind of stock is offered by companies that have a market capitalization of fewer than 5000 crores. These stocks are also called small-cap stocks, micro-cap stocks, and nano-cap stocks.

What are the main Features of penny stocks

The features of penny stocks are explained below,

1. Penny stocks are good for short-term investment.
2. These companies' stocks have less market capitalization in the market.
3. The risk involved in these stocks is very high.
4. The changes in the prices of penny stocks are volatile.
5. The returns provided by penny stock companies are very low.

These are the features of penny stocks.

What are Blue Chips?

A company whose market capitalization is high can be symbolized as blue chips. Reliance, Infosys, TCS, Coal India, SBI bank, ICICI bank, etc come under the term blue chips. The risk involved in investing in this share is quite less and as they are reputed companies with high credibility.

What is the Feature of Blue Chips?

These are the features of blue chips stock companies given below

1. These stocks are suitable for long-term investment.
2. These stocks are not grown rapidly.
3. The companies which come under blue chips have high market capitalization.
4. These companies have good financial health.
5. The investment grades are better for these companies compared to others.
6. These companies are highly reputed in society.

So these are the features of blue chips

We saw the meaning of both the terms penny stocks and blue chips. Let’s see what are the differences between them.

• If you talk about long-term returns, blue chips provide good long-term returns compared to penny stocks as the value of these stocks is low their returns will also be low and thus can easily be manipulated.
• The dividend payment in penny stocks is rare for the shareholders. Whereas, the blue chips provide its holders provides regular payment of dividends.
• If you want to invest your money in stocks for saving, then blue chips are most advisable than penny stocks as they provide good returns, your money will be safe as it reputed company. But in penny stocks, as they are low-value stocks, the odds are against success.
• The liquidity of stocks is low in blue chips and it is high in penny stocks.
• The market capitalization of penny stocks is low compared to blue chips.
• The changes in stocks are highly unpredictable in the case of penny stocks compared to blue chips.

So these are the major difference between penny stocks and blue chips. So if you want to invest in stocks better learn about them in detail. For long-term investment, the blue chips are suitable as they provide a high return with less risk involved. If you are looking for short-term and ready to take risks then you can opt for penny stocks.