Different types of stocks have different requirements for investing. There are also different levels of risks and rewards for each. Blue chip stocks only include the companies that have been the most profitable over time. Blue chip stocks usually have the lowest risk because the have a track record for stable earnings and they do not have extensive liabilities. This type of stock has a very reliable track record for paying dividends. Most people who are looking for an investment that is reliable and relatively risk free will use blue chip stocks.
Penny stocks are very low priced. Typically, they can trade from two cents to $5 per share. Penny stocks usually are not traded in any of the major exchanges. There is a high risk for this type of stock, especially for people who are just starting out. Many people use these ones because of the low cost, but use them with caution.
Growth stocks are stocks that are suppose to earn a lot of money. This type of stock does not pay dividends because all the money is reinvested so it can grow. While they are growing, the price for the stocks will generally increase dramatically. There is a high risk in growth stocks due to the prices fluctuating.
A value stock is a stock that is being traded below its market value, according to the investor. The stock is believed to have long-term growth potential and it is being traded at a lower price.
A lot of people prefer an income stock because they pay a high dividend. The dividends will gradually increase and the stockholder will get a regular payment. This is a low risk investment and a lot of people use this to gain profit. This type of investment can be found in almost any industry.