Compare and contrast blue chip, income, growth and cyclical stocks
What will be an ideal response?
Answer: Blue chip: Stocks of major, well-established corporations with demonstrated ability to manage their way through every kind of economic condition; such stocks are usually considered safe, if not necessarily thrilling, choices.
Income: Stocks purchased primarily for dividend payouts rather than capital gains potential; companies tend to be older, stable firms with fairly predictable profits but lower prospects for growth.
Growth: Stocks from rapidly growing companies that usually reinvest profits (to keep growing) rather than paying dividends; investors buy these stocks for potential capital gains, not income; companies tend to be smaller and younger, and many are in the technology sector.
Cyclical: Stocks from companies whose earnings tend to track the ups and downs of the economy in a predictable pattern–in other words, their revenue and profits grow as the economy grows and shrink as the economy shrinks; many of these companies are in basic industries such as housing and transportation.
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