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Types of Stocks

  • Posted Date: February 4, 2020

There are many kinds of stocks and stock tips or share market tips available in the market. Most of them are classified based on characteristics like their classes, ownership, risk, price trends, etc. And their characteristics hugely influence the pricing and return on these stocks. Here is the list of some types of stocks along with the factors that will determine their prices

•    Growth stocks

Growth Stocks are the types of stocks that do not pay high dividends. This is because the company prefers to reinvest its earnings to enable it to grow faster. Thus, the value of the share of the company grows at a faster rate and allows its investors a good profit through high returns. All those investors looking forward to long term growth potential should invest in Growth stocks.  Also, another fact to know about Growth stocks is that they carry a higher risk than their counterparts. Companies holding Growth stocks are companies that are generating positive cash flows and whose earnings are expected to grow at an above-average rate relative to the market. These are favourites of investors due to the high potential of growth, hence you can get a lot of share market tips related to these stocks.

•    Dividend aka yield stocks

Dividend stocks are the stocks that yield a higher dividend concerning the price of the share. They are the stocks that result in higher income. The companies holding Dividend stocks are considered to be stable companies that can afford consistent dividends. These are also the companies whose Stock value may not rise much higher. IT companies are the best companies offering dividend stocks at low risk. They can be considered as a secondary income for the investor as they are not taxed.

•    Defensive stocks

Defensive Stocks, as the name suggests, are the stocks that are defensive against all the situations. They do not portray a major fall in their prices, even in the odd conditions.  Thus they are preferred when Market conditions are poor. The reason behind these stocks being defensive is that they sell consumer staples. They usually provide consistent dividend and report stable earnings in the market. The companies providing Defensive stocks are the one that operates the business on utilities like food, beverages, etc.

These are must for a balanced portfolio and hence advisors recommend these as well in their stock tips.

•    Common Stock

Common Stocks are the stocks we generally talk about. The majority of the stocks which are issues in the market belong to this category. They give investors common shares that represent ownership in a company and a claim (dividends) on a portion of profits. Thus, if a company earns any profit, the investors will get a portion of it. Investor of Common Stocks gets one vote per share to elect the board members, who oversee the major decisions made by management. Also, they yield a higher return in the coming year’s investment. The only drawback of Common Stocks is that if a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, bondholders, and preferred shareholders are paid.

•    Preferred Stock

The only advantage of Preferred Stock over Common Stock is that it guarantees a fixed dividend forever. But Unlike Common Stock, it does not offer voting rights to its investors. Thus, we can say that it gives some degree of ownership in a company. Another advantage of holding Preferred Stock is that at the time of liquidation investors of Preferred Stock will be paid off before common stockholders. Although the price of preferred stocks is not as volatile as a common stock; it is the common stock that gets the benefit of priority when the company has surplus money to distribute. They are also termed as callable Stocks i.e. the company has the option to purchase the shares from shareholders at any time for any reason.

If you want to avail of some great stock tips or share market tips you can contact Shyam Advisory and get some fruitful tips.

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