Different Types of Stocks Explained

Trading stocks on the stock market can be quite a scary venture for the first-time trader on the market. There are many important things to know before one decides to trade stocks. There are different types of stocks on the market to invest in, and a first-timer should have a good idea of these various types of stocks. Here are the different kinds of stocks on the stock exchange.

Preferred stock is a type of stock on the market. In fact, the owners of preferred stock rank higher in the pecking order compared to owners of common stock. On the other hand, these traders receive their dividends before the holders of common stock. They receive a fixed dividend payment whereas the common stock owners receive the new amount if the profits fluctuate. Preferred stock owners do not have any voting rights. But they can convert a part of their stocks to common stocks in some cases.

On the other hand, common stock is purchased by part owners of the company they are investing in. These owners have the voting rights with a company. The more shares a person owns, the stronger his/her vote is.

Although preferred and common are the two main types of stocks on the market, companies can customize different classes of stock the way they like. This is because a particular establishment will want the voting authority to remain with a specific group. Hence, specific categories of stocks will be given different right to vote.

In conclusion, investing in stocks should be done only after you are thorough with the basics of stock trading. There are different types of stocks on the stock market. Preferred and common stocks are the two principal types of stock on the market. This read offers information on various kinds of stocks on the market.