Blue chip stock is common stock of the largest, most financially stable corporations in America, considered leaders in their industries. These stocks have a history of stable or increased dividend payments. An investment in blue chip stocks is generally considered relatively conservative, but any investment in stock carries with it the risk of losing your entire investment. Growth stocks are purchased by investors willing to take more risk for greater potential price appreciation. This ratio is obtained by dividing the current market price per share by the company's most recent earnings per share.
Penny stocks are high risk, low-priced, highly speculative stocks usually issued by new companies.
They may be offered over the telephone or through the mail by high-pressure salespersons who hope to make substantial profits. These stocks are often issued by struggling companies. While some penny stocks have turned into profitable investments, the failures far outnumber the successes. An investor interested in penny stocks should be aware of the high risk of loss associated with them. As already noted, growth stock offers potential for price appreciation.