Types of stocks

Stock Market - Types of Stocks.

You do not really need to be an expert on all the types of stocks available in stock market;However, being able to differentiate and pick the right stocks is crucial to stock market investing. There are different types of stocks to choose in the stock market.

Depending on your investment and your goals, you may feel that some stocks are better than others. Being able to tell the difference between preferred and common stocks is among the basics one should know before getting started in stock market investing.

Common Stocks
When people are discussing stocks they’re usually referring to this type. Majority of stock issued is in this form. Each common stock you have offers you a specific amount of ownership, entitles you to some dividends and allows you one vote for each share you own in electing directors or making key business decisions. In this sense, Common stocks are different from debentures or bonds, which are money given to a company as a loan in return for the promise of specific interest

In long term, by means of capital growth, common stocks yield higher returns than most of the other investments. This higher return comes at a cost since common stocks entail the most risk. If a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, bondholders and preferred shareholders are paid.

Preferred Stock
Preferred stock represents some degree of ownership in a company but usually doesn’t come with the same voting rights. With preferred shares, investors are guaranteed a fixed dividend forever. This is different from common stock, which pay variable dividends that are never guaranteed. If the company goes bankrupt, stock holders holding preferred equities get faster access to any assets not used towards paying debts. The position of investor with preferred cumulative stock is secure. This type of stock allows unpaid dividends to be accrued. If a company cannot pay dividends one year, your dividends accrue until the company can pay. During such period all the money owed over the previous years will be paid. Those holding preferred types of stock usually have no voting ability and these stocks only get their pre-determined dividend and never more than that. This offsets the other advantages of preferred status. Preferred stocks may also be callable, which means the company has the option to purchase the shares from shareholders at anytime for any reason (usually for a premium).

More categories of stocks: Growth Stocks, Blue Chip Stocks, technology stocks, speculative stocks, ’Low-Risk, Mid-Risk, and High- Risk Stocks’.

Table of contents: Stock Market tutorial

1. Stocks: An introduction.
2. What are stocks ?
3. Types of stocks.
4. How stocks trade
5. How stock prices change ?
6. How to purchase stocks ?
7. How to read a stock table/quote.
8. Animals in stock market
9. Stock Market Tutorial: Summary.