There are some common stock phrases that you might have heard, like "I'll put you in the loop" or "you're throwing off cash". These are sayings that are connected to common stock that people own.
If you're interested in investing in stocks but aren't sure where to start, this blog is for you. We're going to break down all of the different types of stocks that exist, so that you know what you're getting into.
- Common Stock
There are several different types of stocks, but the most commonly traded type is common stock. Common stock consists of shares of ownership, or equity, of a public corporation. These shares provide investors with the right to vote in the company's decision-making process and to receive a periodic portion of the company's profits (dividends).
- Value Stock
Value stock is one type of stock which refers to companies that are undervalued by the market. This means that although the stock price may not be as high as those of other stocks, the company has great potential for growth with its products and services. These securities are often stable with a high dividend yield and can provide investors with a healthy long-term return.
- Preferred Stock
Preferred stock is a type of stock that holds a special class of ownership in a company. Stockholders are given preference over common stock holders when it comes to dividends and payments. It can also be seen as a hybrid between common stock and debt because the holders have priority in liquidation for their capital as well as the ability to enjoy dividend payments.
Preferred stock is often issued without a specified maturity date, meaning it's perpetual. Preferred stock can be issued in both publicly traded markets, over-the-counter markets, and private companies.
- Domestic and International Stocks
Domestic stocks are securities of companies that are listed on the stock exchange in our country. These stocks are purchased by investors through their financial advisors and brokers to generate returns from capital appreciation.
International stocks are securities of companies that are located in different countries outside of our home country. Investors have access to a much wider base of companies to choose from when allocating capital to their portfolios. Need help with your stock portfolio? Find more here.
- Growth Stock
Growth stocks tend to be stocks that show relatively higher than average growth. Growth in the company's sales, earnings, and cash flows tends to be well above the overall stock market's rate of growth.
Growth stocks often pay no dividends, but instead use the profits they make to further fund their operations and expand. Growth stocks usually trade at higher multiples than other stocks because investors are willing to pay a higher price for a high-growth stock.
Learning the Different Types of Stocks
The different types of stocks, such as common, preferred, and growth stocks, each have unique characteristics and come with different risks and rewards. Investing with knowledge of the different stock types allows you to make an informed and financially sound decision. Smart investments are the key to success-invest in stocks today and start maximizing your financial future.
If you're interested in learning more about investing or other money topics, visit our blog. We're here to give you all the valuable information you need.