Tuesday, 12 October 2021

What are different type of stocks?

 With the decrement in the myths prevailed in the stock marketing, the craze for the trading is increasing. Now the people from traditional countries like India are also showing their interest in creating wealth by investing in the stock market.

Like other investments, investment in stock market and trading also requires some prior home work. One should learn to identify the right type of stocks having more probability of making profit, and should learn developing the strategy to make money in the stock marketing.

But the first most step in the stock marketing is to learn different types of stock. Here in this guide, we are presenting to different types of stocks based on different classification methods. So these are:

Classification of the stocks on the basis of their stock classes

The types of the stock based on the stock class is the primary factor to classify different types of stocks. In this classification, the stocks are classified on the basis of shareholder’s voting right. Some stocks do not allow the shareholders to vote in the annual meeting and only the management team of the company takes all the decisions regarding he companies.

While the other category of the stocks allows the shareholders as well to participate in the annual meeting in order to make decisions regarding the management of the company via casting their precious votes.

And the third type of the stocks allows the shareholders with the option to cast their multiple votes regarding different matters of the company.

Classification of the stocks on the basis of market capitalization

 

Another type of classification method of the stocks is the market capitalization which include the total shareholding of the organization. The market capitalization of any company is calculated by the multiplication of the current price value of the company stocks with all the shares of the company available in the market. The classes of different stocks are as follow:

Large cap stocks

 The large cap stocks often belongs to the well established blue chip companies having greater reserve of the cash. Make sure that the large cap stocks though belongs to the well established companies but it does not mean that they will grow more rapidly. Instead the small stock companies are more likely to perform outstanding over the long time period. But the benefit associated with the large cap stocks is that they are low risk investment and can keep the capital of the investor preserved for long time.

Mid cap stocks

They are stocks associated with the medium sized companies with the market capitalization between 250 crore INR to 4000 crore INR. These companies though of medium sized but are well known in the market and thus are having the power to provide the better returns along with more stability.

Small cap stocks

These are stocks associated with small companies with market capitalization of less than INR 250 crore. These are high risk and less stable stocks but can provide the investors with the potential option for growing at rapid pace  in the future.

Classification of the stocks on the basis of ownership

There are basically three types of stocks on the basis of ownership. These are:

Common and preferred stocks

 Preferred stocks are those that allows the investors to pay a  fixed amount every year. In general, the price of preferred stocks are not volatile and the common stocks allows the investors to get the profit of priority in the case when the company goes in profit.

The common stocks allows the stock holders with the power of the voting right while in the preferred stocks, company’s creditors, debenture holders, and the bond holders will get the priority.

Hybrid stocks

Hybrid stocks are a kind of preferred stock where the stock holder is having the option to convert it in common shares at a certain time with certain conditions.

Stocks having the option of embedded derivatives

 These stocks are either callable or are putable and these stocks are not commonly available. The callable stock are those stock which are bought back by the company at particular price after a particular time While the Putable stocks are those which allows the shareholders to sell the stock back to the company at a particular price after a particular time.

Classification of the stocks on the basis of dividend payment

Growth stocks

These are kind of stocks where the company do not pay high dividends to the shareholders as  they prefers to invest the earning in the better growth of the company and thus help the shareholders to get the highest returns with the faster growth of the company.

Income stocks

These are stocks that use to pay higher dividends to the shareholders in comparison to the price of the stocks. This helps ths investors to get higher income in the form of dividends.

Classification of the stocks on the basis of fundamentals

Overvalued

These are stocks that exceed the intrinsic values.

Undervalued stocks

These are stocks ideal for valued investors having faith that the value of the share is going to rise in the coming future.

Classification of the stocks on the basis of risk

iBeta stocks

It is measurement method for measuring the risk of the stocks by calculating their price volatility. The value of beta can be either positive or negative indicating whether it moves along or against the market.

Blue chip stocks

These are stocks with more stability and low liability. They generally belongs to the well established companies having the history of sound performance.

Classification of stocks on the basis of price trends

Defensive stocks

These stocks are unfazed by the financial condition of the market and is preferred in the case of poor market conditions.

Cyclical stocks

These stocks are more affected by the financial position of the market and displays higher fluctuation with the change in the market.

The bottom line

So these are some kind of stocks!      

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