All About the Different Types of Stocks
Investing in stocks has been a popular way for individuals to increase their wealth over time. A stock is simply an ownership unit in an organization. Dividends and capital appreciation are the two main means investors take advantage of their stock investments. Investors can build multiple, risk-adjusted portfolio by investing in multiple-issue or stock index funds. A wide variety of different stocks from different companies are available. There are even ETFs (exchange traded funds) and mutual funds that specialize in stocks exclusively.
Stocks are available in many different forms such as preferred stocks, common stocks, warrant certificates, and different classes of securities. The main types of stocks are common, preferred, and debt securities. Preferred stocks normally act as the ownership of the company with rights to call the equity. Common stocks represent ownership of a corporation with shares being sold in a transaction for the ownership stake of the corporation.
Debt securities are offered to the common stock shareholders as a method of borrowing cash to invest in the company. Debt securities typically give the option for borrowing the money through dividends. Debt securities also give the option of dividends. Both options give the shareholder choices to increase their return on investment. However, debt securities usually come at a greater cost because of the risks involved.
When purchasing stocks the investor will be able to buy a specific number of shares. The number of shares available will depend on the options and the price decided during the offering process. The price will be determined by how the stock market currently is and expectations for future results. It can also be influenced by how long the investor will want to hold on to the shares. Generally, an investor who purchases more than 100 shares will likely have limited options with regards to trading shares after they have purchased them.
The different types of stocks are generally broken down into two categories, common and preferred. A common stock exchange is one that uses the New York Stock Exchange and the NASDAQ Composite Market. This type of stock is usually considered to be a “walking” share. This means that the shares will change in price depending on how other stock in the same category may change.
Preferred stocks, on the other hand, are ones that are considered passive. These are not traded like common or preferred stocks but rather are given a preference in the trading process. For instance, when an investor is searching for stocks that have the potential to make money in the future then he may purchase Preferred Stocks. These types of stocks tend to be more expensive but also give the investor more control over his investments.