Have you ever heard the term “There is a price, there is quality” which applies when we want to buy a product? Prices can’t be deceiving. Quality products usually cost more. This also applies to stock investing. Companies that have fundamentally good quality generally tend to have a higher nominal share price. Stocks that are called blue chips usually have a more premium price. Stock investors are willing to pay handsomely on shares of companies that have good fundamentals, for example, you can get by visiting our website at http://www.forexkenya.net/olymp-trade-kenya.html. Therefore, it is rare to find cheap blue-chip stock prices, except during the economic crisis. When you do Fundamental Analysis, it’s rare to find blue-chip stocks that have very low PER (Price to Earnings Ratio) or PBV (Price to Book Value Ratio).
On the other hand, fried stocks whose fundamentals are not clear are also cheap. The lower the nominal share price, the higher the volatility. Volatility is the range of day-to-day fluctuation in stock price movements. Stocks with good fundamentals are generally owned by investors who hold their shares for a very long time. Most institutional investors also buy blue-chip stocks for their portfolios. Therefore, blue-chip stocks, which are expensive, tend not to have high price fluctuations. Maybe you will see the price movement sluggish like a snail. In contrast to the fried stocks that many speculators buy. The price fluctuation tends to be crazy, if it is tens of percent in a day, until Auto Rejection. Well, now understand, why do blue-chip stocks rarely experience Auto Rejection?
Related to the two things above, namely the quality of fundamentals and volatility, it leads to risk factors. Generally, blue-chip stocks with premium prices tend to have a lower risk. Usually, the resulting returns are not spectacular. On the other hand, stocks from companies with bad fundamentals and high volatility, such as fried stocks, will have a higher risk. Of course, this is commensurate with the return which can be very high too (High-Risk High Return).