Definition of Junk Stock

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Junk stocks are stocks that don't really have a place anywhere, although junk stocks can occasionally deliver great returns. Learn about junk stocks and their relation to blue chip stocks with help from a registered financial consultant in this free video on investing and money management.

Part of the Video Series: Investment Basics
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Video Transcript

This is financial adviser Patrick Munro talking about the definition of junk stock. Well, in these recessionary times, a lot of people have lost money in the stock market and everything's being defined as junk stock. But, in fact, there are high grades of stock and low grades of stock. And to understand both, it is nice to look at the high grade first, also known as the blue chip stocks. These are very high grade stocks and the antithesis of that are stocks that really don't have a place anywhere. And as a result, they're called junk stock. There are some opportunities that exist in junk stock that are only for the folks that have a high propensity to risk because, every now and then, a junk stock will emerge as a company on the move that has a new market system for delivery, and will be able to deliver really great returns going forward, and uncovering those companies is an art form. This is Patrick Munro talking about the definition of junk stocks.

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