Interested in stock investments? But only have a better idea of it? Don’t worry we are here to tell you from scratch what stocks are and what are the different types of stock you should know! The first stock in the world was created by the Dutch East India company when they released their company shares on the Amsterdam stock exchange. Once the investors had their stocks they were the owners of a certain percentage of the company. Since then many businesses started releasing their stocks which helped the company raise their capital.
Deciding to invest is already a big move but your next move will decide your victory. This is because there are more than 10000 stocks around the world wherein all can bring your profit and loss at a 50 -50. So it becomes difficult to choose the right type of stock with better net margins, right?
Here is a list of different types of stock in India which you can choose based on your portfolio or goals you want to achieve.
You have to just select the one which suits you the most given below:
- Saving wealth:- These are investors who avoid any risk because they focus on wealth preservation and are willing to invest in bluechip corporations which are more stable.
- Increasing capital:- These are investors who are willing to take the risk for the sake of profit and big gains. They take high interest in stocks of companies that are in their early growth years.
- Stocks as a source of income:- These are investors who depend on stocks as a source of their income. They purchase stocks that have a fixed rate of dividend even if there are slow growth chances.
Are you done categorizing yourself? Let’s take a look at the different types of stock available in the market.
Every company offers two types of stocks depending on which you may have the right to vote in decisions of the company’s Management which once again plays a huge role as you have partial control over the company. This type of shareholders can join in company meetings and give their views on the company’s decisions.
While contrasting to these stocks some shareholders can’t vote for companies meeting but still get a fixed rate of dividend.
Let’s take a quick example of a house in metro cities like Mumbai. This house is a new well equipped with supplies and has a huge amount of purchase. What do you think about it? It seems it offers all comfort and looks impressive to anybody with money who will purchase it without hesitation right? As the saying goes “Cheap Rowe repeatedly, Expensive Rowe once”
Similar to this large-cap stocks are stocks of well-established companies whose returns are stable and less risky. There are more on the conservative side hence called large-capitalization stocks and have stocks of traded companies having worth more than $10 billion. Just like JP Morgan Chase, Amazon, Walt Disney, star box, and many more.
Mid-cap stocks might appear to you like a FOMO sword. Since many large and mega-cap companies, today were once mid-cap and small-cap companies. The stocks give you medium-capitalization that is less than $ 10 billion. Mid-cap companies’ stock mostly lies in the range of $100 billion to $2 billion. Some of the excellent cap stocks are Facebook, Vanguard, iShares, and many more.
On the other hand, small-cap companies have a market capitalization of $300 million to $2 billion. Moreover, cap stocks have extreme growth opportunities as compared to large-cap stocks which are relatively slow. Small-cap stocks are volatile, too. 25 years back, Amazon also had small-cap stocks but now it has leveled up. This doesn’t mean every company will bloom like that hence investors have to understand the risk of investing in these shares.
These are stocks with increasing amounts of returns hence considered as “leaders” of industry. They are considered the best for their long history of good returns and strong reputation. They pay excellent dividends to their shareholders hence people trust them as a safe place to keep their stock growing. For example ‘Apple’, ‘Coca-Cola’, you must have at least heard their names as top blue-chip companies even though you are new to investments.
These are stocks with a fixed return of dividend, even if there is a fluctuation in the company’s financial assets. They are less volatile and come in better returns in tough conditions. Some examples are Hindustan Unilever, TCS, Dabur limited, and many more.
These are another version of equity stocks but their prices are affected due to a systematic change in the overall economy of the country. They follow the economic business cycle, hence the rise or fall in the business cycle is directly proportional to the cyclical stocks. Hotels, restaurants, furniture, automobile manufacturers are a few of its examples.
As the name defines the stocks are perceived by the investor based on their region. Investors tend to check whether the company is their home-country based or located outside. But in reality, this doesn’t matter as International stocks nowadays are gaining huge exposure. Take the example of Alibaba, an E-Commerce platform for business-to-consumer selling. It is the second-largest online retailer and has competition and popularity too, all because of its high-end quality products.
The stocks are in the growth phase, hence are easily accessible to everyone, yet come with huge risk as investors have to think twice before investing in growth stocks as they are betting on a company’s growth.
IPO stocks are quite matching with the growth stocks but they have a small booster to them. These stocks have a high growth rate as their demand is increasing since 2020. They are mostly rewarding except for a few circumstances. Some of its examples can be Amazon which was once IPO and its investors are now turned millionaires.
Remember the category “Stocks as a source of income” we defined while helping you figure out how to pick your stock? That type of stock is referred to as Income stock. These stocks form a constant source of income with help of even higher dividend rates over a while with less risk.