An investment in Stocks or Stock Trading is a good method of making money only if you are very careful. When you invest in shares you must know different types of stock in the market. Knowledge of all types of stocks helps you to choose a few good stocks to invest. In my last articles I mentioned that you should choose any index shares such as Nifty50 or Sensex30 and buy them when the market is down and sell them when it is up. But if you have a good idea about the types of shares you can easily choose such shares as per your investment strategy and can make profit from stocks trading.
Normally shares can broadly classified in to two, preference shares and common shares. Preference shares have fixed returns as dividends and the preference share holders paid first when the company liquidated or windup. The risk of preference share holders is limited and issue of preference shares is very rare. Because the preference share holders should pay dividend as per the terms of issue of such shares.
The major portion of shares is common shares and investors invest in these shares and trade with it through stock exchange. The common share holders are the actual owners of the company and they have more power and voting right. But as per nature and growth potential of shares and companies, the common stocks can be divided in the following categories.
Blue-Chip Stocks: Shares of strong companies are coming under this category and these companies are completed long ternin business and have a good reputation. Blue chip shares pay steady dividend. These shares get high rating from rating agencies. The risk involved in the investment of this type of shares is very less than other type of shares.
Growth Stock or Glamour Stock: Stock with great growing potential and it is expected to grow above the average limit is coming under Growth Stock. The market fluctuations will not affect the growth of such shares. Investors can safely invest in these stocks because it is almost secured. Normally the earnings of growth stocks are reinvested and it fuels more growth potential. Mostly technology related companies have these types of stock.
Income Stocks: Stocks which distribute regular increasing dividend is known as income stocks. The investors those who have conservative investment strategy likes this stocks. This type of shares is less volatiles and buyers are always ready to buy these types stocks due to high and definite dividend. This shares does not have much growth because the high dividend payout. Normally real estate companies, energy and other natural resources companies have this type of stocks.
Value Stocks: This type stocks have great growth potential and undervalued. Investors can get these shares with low price but it has a high dividend yield and expected to grow high. Investors who prefer value stocks wish to buy a few high dividend yield stocks every year and they are looking for shares which are sold less than its worth.
Recurring Stocks: These type s of stock reacts the rise and fall of economy. It always swings back as per the performance ofeconomy.
If you can identify these various kinds of stocks and could identify your investment strategy you can easily win in stock trading and stock investment.
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