Most people who invest in the stock market probably only know of one kind of stock, that is the common stock, where you purchase partial ownership in the company by purchasing that business’ stock. BUT there are many different types of stocks to be aware of, especially if you wish to diversify yourself in this jungle called the stock market.
So what are the different types of stocks out there? Let’s read on to see what they are, so you can start investigating them and investing in them from now on.
Some stocks on the exchange make dividend payments to their investors regularly. It could be as low as $0.01 per stock, or higher. If you are investing in the stock market to garner a monthly income for yourself, then dividend stocks are the way to go.
Large-cap, Mid-cap, and Small-cap
The total worth of all of a company’s shares is called it’s market capitalization. As you can imagine, companies with the biggest market capitalization are called large-cap, and so on. Large-cap stocks are usually considered to be safer investments than small-cap ones, but here as well you would want to diversify so that you aren’t concentrated in one sector or cap rate.
Do you trust American companies more than international or foreign ones? That would be a mistake as many foreign stocks are doing quite well in the stock markets, particularly from Canada, China, Brazil, and Australia (a stockbroker like monexsecurities.com.au can help with the Australian stock market).
Whenever a company goes public, it offers an initial public offering (IPO), and those stocks, if you trust the business model of the company, are a great way to get in on a company from the beginning. Some recent IPOs have been extremely expensive though, so do your due diligence before investing in one.
Even the business world has its crème de la crème or as they are called blue-chip stocks. These are high-quality stocks from companies that have proven their worth, solidity, and reliability as great performers in the stock market.
On the other extreme are the penny stocks, where the companies are low-quality and the stocks are priced at $1 or less a share, even sometimes pennies (hence penny stocks). Of course, the hope is that the company will turn around its business and result in massive gains for the investor in question. If you invest a lot into a penny stock, even a $1 or $2 gain can be quite profitable.
Now You Know What Are the Different Types of Stocks
If you are at a cocktail party, and someone asks ‘what are the different types of stocks out there’, you are well prepared to answer their question expertly. But more importantly, you can use this information to make your investment portfolio more well-rounded and diversified by buying stocks that are high quality and high-performing.
Don’t forget to check out related articles on investing and other topics on our website and keep learning!