Different Types of Shares on the Stock Market
With the stock market, there are various types of shares. Each serves different purposes, and can either do you good or harm. If you are starting out building your portfolio, or are rearranging your current portfolio, the stocks that you may consider buying can be completely different. Do you want to build a safe and secure backbone for your portfolio, or are you willing to take a risk on a high-gain venture that may fall and lose you money? Do you want to invest long term, medium term, or short term? Your different needs and wants can decide what type of stock you will look at purchasing. What different types of stock are there? Below are a few common types of stock, and a quick explanation of each.
Blue Chip Stocks
Blue chip stocks are known to be very good stocks, as the companies have an annual return of over $4 billion dollars, are known to pay out large dividends and the company will have a track record that makes it a very stable and world renowned company. They are highly unlikely to fall, and aren’t that risky as an investment choice. The problem with blue chip stocks for new investors is that they can be quite pricey, and often the owners of these shares don’t want to sell or trade them due to their stability. These companies will be at the top of their field worldwide, and are most likely to stay in that position for some time to come.
Common stock is the name for the usual type of shares. The holder of this type of stock is given the right to vote on decisions involving the board, and also will pay you an amount of dividends if they are paid out. You are given a level of ownership of the company, and this depends on how much stock you own. Essentially, the more stock you own the more say you have in the company in regards to its decisions and business dealings. (Find out about macquarie edge. Also make sure to visit Review of Markets.Com.)
If you are the owner of preferred stock, you receive preferential treatment in certain circumstances. For example, if the company you are a shareholder in goes bankrupt, you are given first preference to any funds not going towards the payments of debts. For the holder of preferred cumulative stock, then you will be entitled to have any dividends accrue over time should the company not be able to make the pay out one year. The downside to this type of stock is that you do not have any voting rights, and the dividends paid out at the end of the year are predetermined.
For those interested in riskier stocks, then speculative stocks come with a high risk, but also the chance of a high pay out. These are often much harder to predict the future of in terms of growth, and require either a lot of research, or a lot of courage to invest in these companies.
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The Different Types of Stock Shares: Authorized vs Outstanding, Float vs Restricted