What kind of stocks are there

Often, a company will offer only common stock. This makes sense, as that is what shareholders most often seek to buy. Read More: Common vs. Preferred Stock. Stocks also get categorized by the total worth of all their shares, which is called market capitalization.

Companies with the biggest market capitalizations are called large-cap stocks, with mid-cap and small-cap stocks representing successively smaller companies. There's no precise line that separates these categories from each other. Large-cap stocks are generally considered safer and more conservative as investments, while mid caps and small caps have greater capacity for future growth but are riskier. However, just because two companies fall into the same category here doesn't mean they have anything else in common as investments or that they'll perform in similar ways in the future.

Read More: On large-cap , mid-cap , and small-cap stocks. You can categorize stocks by where they're located. For purposes of distinguishing domestic U. However, it's important to understand that a stock's geographical category doesn't necessarily correspond to where the company gets its sales. Especially among large multinational corporations, it can be hard to tell from business operations and financial metrics whether a company is truly domestic or international.

Read More: International stocks. Another categorization method distinguishes between two popular investment methods.

Growth investors tend to look for companies that are seeing their sales and profits rise quickly. Value investors look for companies whose shares are inexpensive, whether relative to their peers or to their own past stock price. Growth stocks tend to have higher risk levels, but the potential returns can be extremely attractive.

Successful growth stocks have businesses that tap into strong and rising demand among customers, especially in connection with longer-term trends throughout society that support the use of their products and services.

Competition can be fierce, though, and if rivals disrupt a growth stock's business, it can fall from favor quickly. Sometimes, even just a growth slowdown is enough to send prices sharply lower, as investors fear that long-term growth potential is waning. Value stocks , on the other hand, are seen as being more conservative investments.

They're often mature, well-known companies that have already grown into industry leaders and therefore don't have as much room left to expand further. Yet with reliable business models that have stood the test of time, they can be good choices for those seeking more price stability while still getting some of the positives of exposure to stocks. Read more: Growth stocks and value stocks.

IPO stocks are stocks of companies that have recently gone public through an initial public offering. IPOs often generate a lot of excitement among investors looking to get in on the ground floor of a promising business concept.

But they can also be volatile, especially when there's disagreement within the investment community about their prospects for growth and profit. A stock generally retains its status as an IPO stock for at least a year and for as long as two to four years after it becomes public.

Read more: IPO stocks. Many stocks make dividend payments to their shareholders on a regular basis. Dividends provide valuable income for investors, and that makes dividend stocks highly sought after among certain investment circles. However, stocks don't have to pay dividends. Non-dividend stocks can still be strong investments if their prices rise over time.

Some of the biggest companies in the world don't pay dividends, although the trend in recent years has been toward more stocks making dividend payouts to their shareholders. Read More: Dividend investing. Income stocks are another name for dividend stocks, as the income that most stocks pay out comes in the form of dividends. One reason why a value stock could be trading below its worth could be a bad public relations story but with the potential to rebound.

For example, consumer goods company The Honest Company went public on May 5, While these events tend to generate a lot of excitement in the investor community, beginners are urged to steer clear of them. Most IPO stocks come with added risk.

Dividends are when a company shares its profits with its shareholders and makes periodic payments. A non-dividend stock is when a company chooses not to pay out dividends but rather reinvest profits back into the company for the purpose of growth.

This strategy is riskier because the company may fail, but it could increase share values and its future rate of return ROR. Non-cyclical stocks are essential items needed regardless of how the economy is doing. Examples of non-cyclical products can be toothpaste, toilet paper, or soap, says Ashton. Blue chip stocks are from recognizable, large, and financially sound companies with a solid reputation to the average person. Typically, these companies have been in business for a long period of time, are stable, recognized for quality, and are thought to be resilient enough to withstand a poor economy.

Examples of blue chip stocks are Coca-Cola Co. Different stocks are placed into different categories or sectors. They are:.

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Next Advisor Logo. Share Share on Social Media. As a result, such stocks are often called growth stocks. This helps the investor earn a higher return when the stock is sold, although this comes at the expense of lower income through dividends. This makes such stocks more risky than income stocks. Blue-chip stocks: These are stocks of well-established companies with stable earnings.

These companies have lower liabilities like debt. This helps the companies pay regular dividends. Blue-chip stocks are thus considered safe and stabile. They are named after blue-colored chips in the game of poker, as the chips are considered the most valuable. Beta stocks: Analysts measure risk — called beta — by calculating the volatility in its price.

Beta values can have positive or negative values. The sign merely denotes if the stock is likely to move in sync with the market or against the market. What really matters is the absolute value of beta. Higher the beta, greater the volatility and thus more the risk. A beta value over 1 means the stock is more volatile than the market.

Thus, high beta stocks are riskier. However, a smart investor can use this to make greater profits. Cyclical stocks: Some companies are more affected by economic trends. Their growth moderates in a slow economy, or fastens in a booming economy.

As a result, prices of such stocks tend to fluctuate more as economic conditions change. They rise during economic booms, and fall as the economy slows down. Stocks of automobile companies are the best example of cyclical stocks.

Defensive stocks: Unlike cyclical stocks, defensive stocks are issued by companies relatively unmoved by economic conditions. Best examples are stocks of companies in the food, beverages, drugs and insurance sectors. Such stocks are typically preferred when economic conditions are poor, while cyclical stocks are preferred when the economy is booming. Open demat and trading accounts. Without these two accounts, you cannot trade in the stock markets.

Read how to open a demat account here, and a trading account here. First, analysis stocks and select ones that fit your investment profile. Read how to conduct stock market analysis. Once you have selected your stock, monitor it for a while.

This is to ensure you buy at the lowest price possible in the near-term. Understand how the stock price moves. Decide when you want to place your order — during market times or after markets. This depends on the share price you are targeting. If you want to buy a stock at a fixed price, and the stock closed at that price, place the order after markets. If you feel you are likely to get a lower price during market hours, place it when the market is open for trading.

Decide the kind of order you want to place. There are three kinds of orders — a limit order, a market order and a stop loss order, IOC Immediate or cancel. A market order is the simplest of the lot — you simply place an order without any other specifications. In a limit order, you set an upper price limit. Suppose you have placed a limit order for 10 shares with a limit price of Rs.

You trade will be processed as long as shares are available at Rs. So, if only 8 shares are available, only 8 out of the 10 requested will be purchased. Once you have decided the specifics of your order, you either go online to your trading account to place the order, or call your broker. Give your bank account details so that the purchase money can be deducted from your account. Now, we have understood the basics of a stock market like the different kinds of stocks and how the share market works.

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