What Are the Different Types of Stocks?

If you are about to do a stock trade, but unsure of which stocks to go for, then you may need to find out the aim of buying stocks. Could it be you are looking for capital gain? Or perhaps your purpose is to earn the dividends as a source of income. Are you going to hold it for a long time? Or you are trading over the move of the stocks prices? Understanding the features of different types of stocks will give you some ideas which stocks you may want to go for to meet your personal objectives.

Basically, stocks can be categorized into two:

1. Common Stock

Most of the time, when you heard about stocks, they refer to the common stocks. Buying a common stock will give you an advantage of owning the equity in the company. You are entitled to the profit sharing in the forms of dividends and gain of share values. As one of the shareholders in the company, you have your say in voting for the board members as well.

2. Preferred Stock

Owning preferred stocks in a company usually does not entitle you to the voting rights. The advantage of preferred stocks is, the dividends are declared prior to those of the common stocks. The same priority will be practiced in the event of assets liquidation, but not before all the bondholders are paid off. The dividends of preferred stocks are in a fixed rate over the par value of the stock. Overall, a preferred stock have the features of a bond and a common stock.

What Are the Different Types of Stocks?

• Blue Chip Stocks. A blue chip is one the most secure types of stocks. They comprises of well-established and profitable corporations. The fluctuation of the stocks is minimal compare to other types of stocks. If you are a more secure type of investor and your objective is to earn dividends as an income, buying a blue chip may be suitable for you as they declares dividends regularly.

• Growth Stocks. A growth stock is purposed to capital appreciation. They usually do not declare dividends as the earnings are going to be reinvested to grow the company. When the business grow, you, as a stock holder will gain as the price of your share goes up. Fluctuations are common in growth stocks and thus not suitable for risks averse investors.

• Penny Stocks. A penny stock is a type of stock which is traded over the counter (OTC). It is a low-priced stock that trades for not more than $5 per share. The low price made affordable to most of the investors, but it carries quite high the risks. Hence, it is only suitable to those with higher risk appetite.

• Income Stock. An income stock is suitable to those who expect a higher dividend declared to the stock they own. It is a type of stock which pay regular dividends and increasing over time. The price fluctuation is low for income stocks. Hence, it is suitable for conservative investors.

• Value Stocks. A value stock is perceived by the investors as undervalued in relation to its fundamentals. Those who invests in the value stocks have the confidence that they will grow in the long term.

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