Types of Stocks
The stock market, like any other market, is a place where stocks are traded. Many of us would be wondering How many types of stocks are there in the stock market. In this article, we will try to cover the stock based on ownership. To define ownership, we can say it’s the state of owning something. Basis ownership, three types of stocks come with their rights & privileges.
How many Types of Stocks are there in the Stock Market?
Let’s check out the types of stocks which you as investors can own in the stock market.
Preference Stock is a type of stock that offers certain privileges to its rightsholder. To name it, preference shareholders are first to get dividend payout first followed by common stockholders. In case the company goes bankrupt, then the company pays them back first before the common stockholder. However, preferred stockholders don’t enjoy voting rights. They are entitled to fixed dividends with a higher yield than common stocks or bonds.
Common Stocks are securities that provide ownership in the company assets. Such stock options allow holders to elect the board of directors and have voting rights to formulate corporate policy. In the long run, investors prefer to own common stock as they offer excellent returns at a high rate. Liquidity is not an issue if the investment is not turning out to be profitable enough.
Some companies offer preferred shares with the option of converting them to common shares at a later date, subject to certain conditions. This type of stock is hybrid stocks or convertible preferred shares, and they may or may not have voting rights.
Now we know what are different kinds of stocks based on ownership. Therefore, it depends on the risk profile of the investors to choose which stocks for them. Every investor benefits from understanding the key distinctions between different types of shares. The more you learn about the stock market, the more confident your investment decisions will be.