Welcome to the second post of Stock Market 101. Today I've been researching the various types of stocks. The stock market really contains two types of stocks: preferred and common.
Preferred stocks tend to offer a fixed dividend rate. Dividends are profits that the company spreads amongst its shareholders. If a company goes bankrupt, preferred stockholders have their claims come before common stock. Companies often have the option to reclaim their preferred stocks. Meaning, at any time, they could buy it back from you.
Common stock represents the majority of stocks. Their claims on assets are handled at the very end if a company is to go bankrupt. They represent higher risk than preferred stocks, but also potentially higher gains.
Stocks also often come with various labels. Although they don't represent any sort of specific type of stock, they are terms you'll likely run into. A few of the common ones are:
Blue Chip Stocks - Stocks from well know companies that have been around awhile. They tend to pay out dividends often.
Value Stocks - Stocks for companies that are performing better than the cost of the stock represents.
Growth Stocks - Stocks for companies that are growing at a rapid pace. Dividends are not usually paid out for growth stocks. The company uses profits to continually grow.
That does it for today. Check back later for more Stock Market 101 tips.
