In some cases, the small-cap stocks are distinguished from the even smaller micro-cap stocks, such as can be found in the Russell Microcap Index. A common stock is a simple piece of ownership in a company. The most common categories are listed below. Small-cap stocks are small companies with the greatest potential for growth — hence, most of these stocks are growth or speculative stocks, and most tech stocks are also in this category, since many tech companies specialize in a narrow niche of the market, or they were started to develop a new product or service, such as the many Internet companies that sprouted during the stock market bubble. Preferred stock. Your total return includes any income you receive from an investment plus any change in its value. Types of stock classes. For instance, during the Great Recession ofNovember and December, 2008, and the early part of 2009, Microsoft was trading below $20 per share, whereas before this, Microsoft had been trading at around $30 per share for a long time. Tech stocks are the stocks of technology companies, which make computer equipment, communication devices, and other technological devices. Small-cap stocks tend to do better than other stocks at the beginning of an economic expansion, unless their growth is constrained by the availability of credit, since they rely more on bank financing than larger companies that can sell bonds directly to the market. Cyclical stocks cycle with the economic cycles, going up strongly when the economy is growing and declining as the economy declines. For instance, many people starting cutting hair for their families, or coloring their own hair to save the $200 that some beauty shops charge. When consumers and businesses cut back spending, some businesses profit, either because they offer a way to cut costs, or because they have the lowest prices. Other stock categories. Other tech companies, such as Facebook, have become de facto monopolies, allowing them to earn very high profit margins, which is reflected in their stock prices. Here are the three main types of stocks: Common stock – Common stocks make up the majority of the buzz on Wall Street. There are many differences between preferred and common stock. Defensive Stocks. The stocks of most tech companies are either considered growth stock or speculative stock; some are considered blue-chip, such as Intel or Microsoft. Manage money better to improve your life by saving more, investing more, and earning more. Defensive stocks are stocks of companies resistant to economic cycles, and may … Note, however, that growth stocks are risky. Income Stocks. Speculative stocks are stocks of companies with little or no earnings, or widely varying earnings, but hold great potential for appreciation because they are tapping into a new market, are operating under new management, have the potential of becoming a monopoly, or are developing a potentially very lucrative product that could cause the stock price to zoom upward if the company is successful. An introductory textbook on Economics, lavishly illustrated with full-color illustrations and diagrams, and concisely written for fastest comprehension. Large-cap stocks consist of the blue-chip, income, defensive, and cyclical stocks, since large companies have little potential for growth. For instance, during the Great Recession oflate 2008 and early 2009, people tried to save by doing more for themselves.

Common stock. Growth stocks are stocks of companies that reinvest most of their earnings into their businesses, because it can yield a higher return on stockholders' equity, and ultimately, a higher return to stockholders, in the form of capital gains, than if the money were paid out as dividends. However, capital gains can be earned from these stocks if they are bought in a bear market, when stock prices are depressed overall or held for a long time. These companies have a high dividend payout ratio because there are few opportunities to invest the money in the business that would yield a higher return on stockholders' equity. You can buy two kinds of stock. During the stock market bubble of the latter half of the 1990's, many of these stocks had ridiculous market capitalizations, and yet, many of them had virtually no earnings, and many, if not most, have since then, imploded. Capital gains can be earned, however, by buying these stocks at the bottom of a business cycle and selling them as the economy reaches full speed, or by holding them for a long time. A company’s stock offerings generally fall into one of two categories: common stock or preferred stock. Many speculative stocks are traded frequently by investors — or some would say, gamblers — in the hope of making a profit by timing the market, since speculative stocks range wildly in price as their perceived prospects constantly change. The main difference is that preferred stock usually do not give shareholders voting rights, while common stock … Blue-chip stocks are stocks of large, stable companies with a long history of stable earnings and dividends, and are typified by the stocks composing the Dow Jones Industrial Average, including General Electric, IBM, Microsoft, and Pfizer. Note that even the micro-cap stocks include only those stocks listed on major exchanges — they do not include OTC bulletin board securities or pink sheet stocks, which do not satisfy the requirements to be listed on a major exchange. Investors have different objectives, such as growth or income, and different risk profiles and different investment horizons. So even if earnings remain stable, the stock price will decline. Some examples include Alcoa, Caterpillar, and Brunswick. Hence, investors seek stocks that satisfy their objectives. Brown stock (Fond Brun): The Brown stock is made with beef, veal, and poultry meat and bones. Mid-cap stocks are composed of most of the categories listed here, since their market caps range from the top of the small-cap market to the bottom of the large-cap market. Income stocks generate most of their returns as dividends, and the dividends — unlike the dividends of preferred stock or the interest payments of bonds — will, in many cases, grow continuously year after year as the companies' earnings grow. Describes the best tax policy to maximize happiness and economic wealth, based on simple economic principles. Most tech stocks are listed on NASDAQ.

The best time to buy and sell these stocks is at the bottom and top of a business cycle, respectively. The Pauper's Money Book shows how you can manage your money to greatly increase your standard of living. Speculative Stocks. Market Capitalization = Stock Price × Number of Stocks Outstanding. Another risk is bear markets — growth stocks tend to decline much more than blue-chips or income stocks in a declining market, because investors become pessimistic, and will sell their stocks, especially those paying no dividends. Different Types of Stocks You Should Know. Auto repair shops do better, because people cut back on the purchase of new cars, but spend more for maintenance and repairs for their older vehicles. If a growth-oriented company doesn't grow as fast as anticipated, then its price will drop as investors lower its future prospects, so the P/E ratio declines.

And while most retailers were hurting significantly during the Great Recession, Wal-Mart was one of the few that actually thrived, since Wal-Mart is recognized as providing lower prices than other retailers.

Defensive stocks are stocks of companies resistant to economic cycles, and may even profit from them. As you grow older, your capacity for risk usually diminishes and it becomes ever … Some companies also issue preferred stock, which exposes you to somewhat less risk of losing money, but also provides less potential for total return.

Common vs. preferred stock. Exchange Traded Fund (ETF) ETFs are one of the different types of stocks you can trade or invest … OTC bulletin board securities or pink sheet stocks, Privacy Policy – Privacy & Terms – Google, How Google uses information from sites or apps that use our services – Privacy & Terms – Google, WebChoices: Digital Advertising Alliance's Consumer Choice Tool for Web US, Economics: An Illustrated Introduction to Microeconomics, Macroeconomics, International Economics, and Behavioral Economics.

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