Investing in the stock market is an excellent way to increase wealth and achieve financial goals. With so many types of stocks, it can take time to know where to start. According to statistics, the total transaction volume from July 2020 to June 2021 is close to 149 trillion US dollars. This blog post explores the variety of stocks available to investors and how they differ.

By the end of this article, you should better understand the plethora of options available to you and how to make an informed decision when investing in the stock market. Knowing the different types of stocks is critical in building a successful portfolio, whether a beginner or an experienced investor. Let's start!

The 8 Major Stock Types You Need to Invest in

You can find different types of stocks in the stock market. But some of the essential delivery types are becoming the first choice for investors. Here are the top 8 investment types:

Common stock

Common stock is the first and most common type of investor. This stock is an ideal solution for beginners. This type of stock entitles you to a percentage of the company's profits and voting rights. Common shareholders also receive dividends, which are paid periodically to shareholders, but these payments are usually variable and not guaranteed.

The upside potential for common stockholders is theoretically unlimited, but they risk losing everything if the company or organization fails with no assets.

Preferred stock

Preferred stock is another crucial type to consider when investing. The stock gives more preference than common stockholders. If the company is dissolved, selected shareholders will receive a certain amount of funds in preference to common shareholders. In addition, stock shareholders are entitled to dividend payments before common shareholders.

Preferred stock is typically more familiar with fixed-income investments than traditional common stock; usually, a company sells only common stock. Generally, preferred stocks are suitable for investors prioritizing income over long-term gains.

Growth and Value Stocks

If you're interested in stocks or the stock market, you're familiar with growth and value stocks. But what is the difference between them? Are they the same? No, they are not. Growth stocks are those whose companies are growing significantly. Investors are usually willing to pay more for these stocks because they expect higher returns. Growth stocks are generally riskier, but the potential rewards are attractive.

In contrast, value stocks are considered more conservative investments. These stocks are actually for sale, and these are stocks that investors believe are undervalued and undervalued. Value investors look for companies with cheap shares or past share prices relative to competitors. These stocks are expected to appreciate as they fly under the radar or suffer from short-term events.

Large-cap, mid-cap, and small-cap stocks

Market capitalization refers to how much your stock is worth in total. Companies with the highest market capitalization are called large-cap stocks, companies with the smallest market capitalization are called small-cap stocks, and companies with mid-cap stocks are called mid-cap stocks. Stocks with a market capitalization of $10 billion or more are classified as large-cap stocks. In contrast, stocks with market capitalizations between $2 billion and $10 billion are classified as mid-caps, and those with market capitalizations below $2 billion are classified as small-caps.

IPO

IPO stocks are shares of companies that have gone public. The stock is perfect for those looking for a promising business concept. Investors who want early access to a solid business idea are often excited when a new company goes public. However, there are risks with these stocks, mainly if the financial community is divided on their growth and earnings potential.

Dividend and non-dividend stocks

Dividend and non-dividend stocks are also two different types of stocks. Many companies pay shareholders dividends, which becomes a regular income for their shareholders, and companies that pay $0.01 per share qualify as dividend stocks.

Conversely, companies that do not pay dividends to shareholders are considered non-dividend stocks. That doesn't mean non-dividend stocks are less popular, as they can represent great investments when their share prices rise. Some of the world's largest companies don't pay dividends, and the trend in recent years has been for more stocks to pay dividends to their owners.

Blue chips

Blue chips are another outstanding stock to invest in. They are an ideal investment choice for those looking to reduce risk due to their durability.

Blue chips are the best in the business world and include companies with leaders and good reputations in their respective industries. It's important to remember that they offer lower yields than other stocks. Conservative investors may prefer to weigh their portfolios with blue chips, especially in times of uncertainty.

Penny stocks

After all, penny stocks are low-quality stock investments. Due to their high-risk, speculative business practices, Penny stocks are prone to scams that can drain a lifetime's savings. But they are the best because of their prices and high margins.

Diploma

Investing in stocks is a great way to top up your money, but you should learn about the different types of stocks before you start. Investing in a diverse range of companies can reduce your risk and increase your chances of earning a healthy return on your investment. Blue chips, growth stocks, income stocks, value stocks, and penny stocks are the different types of stocks and bonds you can invest in. Each of these companies has its own characteristics and risk profile. Therefore, it is crucial to familiarize yourself with and understand them before making investment decisions.