Understanding blue chip stocks vs. growth stocks is the key to successful stock trading. In fact, successful stock trading entails a thorough understanding of different types of stocks. Blue chip stocks and growth stocks differ greatly. They both have certain advantages and disadvantages. However, trading or investing in both types of stocks is a game that enables investors to gain substantial profits over the long run.
That being said, if you intend to make significant gains in stock trading, understanding blue chip stocks vs. growth stocks is the key. Fortunately, we are going to help you understand the differences between these two types of stocks in this article. So keep reading and know all that you need to know.
Blue chip stocks vs. growth stocks
Blue chip stocks vs. growth stocks is a very key aspect of stock trading. You need to understand the differences between, as well as the advantages of, the two types of stocks for successful trading.
Blue chip stocks are from the best and high-quality companies in the market. Such companies are popular for their reliability and are generally considered low-risk investments. However, there are certain disadvantages such as they don’t grow much.
On the flip side, growth stocks are comparatively new companies in the market. They report good recent earnings and exhibit great potential for growth. However, such companies are often risky for investment.
What are the key differences between blue chip stocks and growth stocks? Let’s dive deep to find out.
Blue chip stocks are the most popular companies in the market and that’s why their stock price is also high. On the other hand, growth stocks are comparatively less popular and therefore, have low stock prices as compared to blue chip stocks.
2. Size and status
Blue chip stocks are highly successful companies. They are generally at the peak of success and therefore they have prominent status in their industries. For example, Apple is among the best tech companies in the world. Contrarily, growth stocks don’t have such a status in the industry. They only aspire and work to achieve that status in the future.
As we have mentioned earlier, blue chip stocks are highly successful companies. These companies have already grown to such a stature that further growth is difficult. However, this doesn’t necessarily mean that they don’t grow or strive to grow. Conversely, growth stocks have a high potential for growth. They have more room for growth and therefore, report more earnings. Increased earnings in turn lead to increased share price and that is why traders can make significant gains.
Risk is one of the key differences when analyzing blue chip stocks vs. growth stocks. Blue chip stocks are popular companies and have a long-standing history of success. Their capabilities to survive for such a long time make them more reliable for investors. Therefore, investors see them as secure and safer for investors. However, growth stocks cannot enjoy such trust from investors. These are relatively new companies and are considered risky regardless of their recent success and growth potential.
Blue chip stocks generally offer dividends to their shareholders on a regular basis. Additionally, they also gradually increase dividend payments. In fact, the steady growth of these companies is reflected through increased dividend payments. On the other hand, growth stocks don’t offer dividends to their investors. Why so? Because growth stocks prefer to grow aggressively and therefore, reinvest their profits to grow at a great pace. Whereas, rapidly increasing share prices of growth stocks compensate shareholders for the lack of dividends.
Blue chip stocks vs. growth stocks – the wrap-up
“Blue chip stocks vs. growth stocks” is a very key concept in stock trading. Understanding the differences between blue chip stocks and growth stocks is integral to developing a good portfolio. As you know, both types of stocks have advantages and disadvantages. Therefore, sticking to only one type exposes your portfolio to certain disadvantages. The best bet is to invest in both types of stocks. It will enable you to maximize your gains through growth stocks while having reliable blue-chip stocks in your portfolio.