For most new investors the words stock market mostly sounds simplistic, a place they can go buy or sell stock – stock exchange. What they do not know is that there are usually different types of stock on offer, whether you are thinking of buying, selling of simply investing. The different types of stock available in the stock market each have their own unique advantages as well as disadvantages therefore before engaging a stock broker, you need to fully understand them.
Let’s look at the 3 main types of stock that you must know and their implication on your finance.
#1 Common stock
Common stocks are the shares you mostly see on display online as well as on many newspaper and magazine publications and are used to measure the stock index. Investing in a common stock gives you a stake in a company therefore you have a level of ownership depending on the quantity of stock you purchase.You will also be able to participate in voting when major decisions have to be made, or during board elections as well as enjoy a share in your company profits as well as value. The downside of this type of stock is that it is considered a risk when compared to other stock and in some cases they may not pay you a dividend.
#2 Preferred stock
A preferred stock in a company will give you as an investor,a degree of ownership however, you will not be granted any voting privileges. On the positive side, you will benefit from a determined dividend that is significantly higher compared to those of common stocks. In addition, in the event the company goes under or is liquidated, you will be prioritized before a common stock holder therefore meaning your stockis much safer than that of the common stock holder.
#3 Share class
A share class is not a new type of stock but rather a stock that is more or less a special extension of either a common or preferred stock.Basically when you own a common or preferred stock in a company, depending on their share class, you may be able to enjoy certain privileges. For instance, an investorwith share class A stocks having more voting power than an investor with an equal amount of shares but belonging to share class B.
There you have it.
Be sure to reach out to us and we will take you step by step through the process of identifying the right stock for you.