Different Types of Stocks There are so many varied types of stocks on the market that new investors can get thoroughly confused.
Some of them end up making the wrong decisions while others simply give up any thoughts of investing.
So if you plan to invest, you need to know everything you can about stocks and its types.
Common stock is something most of us have heard of.
What it means is the purchasing of a basic part-ownership in a company, and anyone regardless of age, income and gender can avail of it.
When the company prospers, so does your stock.
If the company accrues losses, the value of your stock decreases.
Even though common stock owners do not take active part in the daily operations, they have the power to elect a board of directors.
In addition to the common stock, there are a few other types too, like Class A and Class B stocks.
Class A stock differ from Class B wherein they give the owner more number of votes for every share.
The legal provision for creating different classes of stocks has been in practice since 1987.
A large number of investors usually tend to avoid from getting stocks that have classes, and if they have more than one class they are not common stock either.
The most premium type of stock is the Preferred Stock.
This is a mixture of stocks and bonds.
By purchasing preferred stock, the owner has special benefits such as claims on the assets of the company in case of bankruptcy or insolvency.
In such cases the preferred stock owners are paid off before the common stock owners.
Also, the company usually has a right to buy this stock back from the owner and stop paying dividends on it.