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Blue Chip and Small-Cap Stocks. What's the difference?
2023-02-15 • Updated
This article aims to address one of the most traded financial assets around the world, Stocks, as well as some of its characteristics.
In it, we will try to explain what Blue Chip and Small Caps Stocks are, providing some examples of both, as well as commenting on their particularities, advantages and disadvantages of each one, so that the trader can understand how to choose Stocks more consciously before negotiating them.
Stocks: What are they?
In general, stocks are mobile financial assets that generate the right of participation, partnership or remuneration to investors, whose income comes from the performance of a particular company in the market. In short, they represent titles of part of the capital stock of the company that issued it. Therefore, those who own shares can be considered a “partner” of the issuing company. But how stocks are generally classified?
In terms of classification, stocks are classically defined as Blue Chips or Small Caps. Blue-Chip Stocks usually represent well-known or traditional companies (such as Microsoft, Coca-Cola, Disney, Apple, Johnson & Johnson), having high negotiability and liquidity. Second-line shares, or Small Caps, represent companies that are not yet well known by the general public and whose negotiability (liquidity) is much lower compared to a more traditional company.
Which one to choose?
Small Cap Stocks have much greater volatility (oscillation) than top-line shares (the so-called Blue Chips). Given this context, more conservative traders choose to trade Blue Chips while riskier traders usually prefer Small Cap options, precisely because of their oscillation. Profits from shares, in turn, can be obtained either by simply buying and selling these assets in the market or by receiving dividends, depending on the company's commercial results, representing the portion of corporate profit that is distributed to shareholders periodically. It is worth remembering that dividends are paid proportionally to the number of shares a client owns.
How to open an FBS account?
Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading.
How to start trading?
If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.
How to withdraw the money you earned with FBS?
The procedure is very straightforward. Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.