Many first time investors are confused about the different types of stocks. This confusion causes people to shy away from the stock market and any self-managed type of investments altogether. If you want to enter the stock market, and become a successful investor, you’ll need to know what types of stocks are available and what they mean.
In addition to the different types of stock, we’ll cover different ways to trade stocks. Not every strategy is the same, but when it comes to how they are classified, they can be broken down into four main types.
But first, let’s cover the different types of stocks and their respective classes.
The first is what is referred to as Common stock. This is a term you might hear quite often, because anyone can purchase common stock, regardless of age, income or financial background. Common stock is essentially taking part ownership in the business you are investing in. As the company grows and earns more money, the value of your stock increases. On the flip side, if that company performs poorly or goes bankrupt, the value of your stock will drop. Common stockholders don’t participate in the day to day operation of a business, but, they are given the power to elect the board of directors.