Let’s start off with what a stock is. A stock is something that gives a person a share of ownership in a company. And are a common investment vehicle, available in different categories.
Some stocks are much better investments than others, and some fit into multiple categories. Here are a few types of stocks:
Blue Chip Stocks
These stocks are shares in large, stable companies that profit continuously. They grow rather slowly with their earnings being extremely dependable. While they’re expensive, they provide the lowest risk and have an established record for earnings.
Speculative Stocks
Startups with little to no financial history typically issue these kinds of stocks. This stock comes with a high risk because a number of these companies do not succeed. However, what makes them appealing to investors is the potential to get a huge return. Because, if the company is successful, the stock grows in value and increases the investor’s rate of return.
Growth Stocks
These are usually issued by companies with high earning expectations. However, these earnings are then reinvested back into the business to fund development. These stocks usually pay low dividends but this doesn’t scare off some investors, as with the company’s growth, its stock value is likely to increase.
Value Stocks
These stocks are viewed as rather undervalued in the market, but a lot of investors see potential, as a company that issues this stock has assets worth more than the stock price.
Income Stocks
These are often blue-chip stocks from very well-established companies, normally paying high dividends which at times include the majority of earnings. This stock is the least volatile and provides investors with a consistently growing income stream. Usually, companies with this type of stock are in stable industries like energy, finance, utilities, and natural resources.
Penny Stocks
These kinds of stocks are low-priced with a high risk, trading at no more than $5 per share and sometimes going as low as 2 cents a share.
Cyclical Stocks
These types of stocks are dependent on the health of the economy, flourishing during strong economic times and losing a substantial amount of value during low economic times.