Overview of Investment
In Investing, a higher risk is synonymous with higher profit potential. Therefore, stocks are also classified into Beta and Blue-Chip Stocks based on the risk associated with them. Beta measures the volatility of stocks. Alternatively, it helps in analyzing the returns of a stock relative to its benchmark.
Beta stocks are the higher-risk stocks, where the beta value is greater than 1; this means that if Nifty falls, these stocks will fall by a wider margin. Naturally, such stocks offer higher return potential as well.
Blue Chip refers to stable companies that have higher market-cap and pay regular dividends. Since these companies are well-established, the risk is limited; hence the profit potential is also capped. Beta or Blue Chip stock is therefore picked based on the investor’s risk appetite.