Investing In Stock Market - Knowing The Different Types of Stocks

When you decide to invest in the stock market then you should learn about the different types of stocks. It makes the investor bewilder that he makes wrong investments. The stock market is so confusing if you do not learn the tricks of the trade you end up losing your money. This is the reason why people shy away from this type of investment.

The term you usually hear in connection to the stocks is Common stock. This common stock can be bought by one and all irrespective of age, income or with financial backing. This common stock is an important part of the business you wish to invest. As the business firm expands the value of the stock owned by you also increases.

 

Similarly when the business crashes the stock in your hand loses value. These share holders have the right to elect the board of directors of the company but do not have the right to take part in the regular functioning of the company.

 

Once again these common stocks are classified into different classes of stocks. They are the A class and the B class. The A class also referred as the first class have more voting rights than the B class. The company has the right to create these classes since 1987. Usually investors do not invest when there is more than one class.

 

When this stock has more than one class it is not termed as common stock.

Preferred Stock is the most chosen and desired stock by the investors. This is basically not a stock. It is a combination of the stock and the bonds. Investors owning these preferred stocks have a claim on the assets of the company when their business becomes insolvent.

 

They have the right to the profits of the company before the common stock holders. Learn well before you invest about the prospects of the company before buying these preferred stocks as the company has the right to take back the issued stocks from the investor or even stop paying the dividends for the stocks owned by them.