Know The Different Types of Stocks an Investor Must be Aware of | Motilal Oswal
Know The Different Types of Stocks an Investor Must be Aware of | Motilal Oswal

Be Aware Of These Major Types Of Stocks As A Stock Investor

For a novel stock investor, a stock is nothing but a company where they invest their money for certain returns. But many investors are unaware of the types of stocks offered by companies, which is the most fundamental thing to know before you take a leap into investing. There are different types of stocks, namely, common stock, preferred stock, domestic stock, and international stocks. Each variety of stock has its definition, purpose, and return on investment. 

Now, to analyze the stocks, you must have a clear picture of the stock classifications in the market. Stocks are classified based on their ownership, market capitalization, dividends payment, risk level, and fluctuations in stock prices. Once you get the idea of the major categories of stocks available in the market, making investment decisions in the future would be smoother. So, here we enlisted the snapshot of different types of stocks that you must be aware of as a stock investor:

  • Common Stocks: These stocks are also called capital stocks, as each share is equal to a part of the company’s ownership. Once common stocks are bought, the investor will become a shareholder of the company. Buying common stocks will grant voting rights to the shareholder, where they have a say in the company’s decision-making. When the company generates profits, common stock shareholders are entitled to receive a dividend income on their stock investment, but only after paying the preferred shareholders. 
  • Preferred Stocks: If you are an investor who bought preferred stocks, you are given more importance than any shareholder of the company. Although preferred stock shareholders don’t have voting rights in the company, they are the first to get paid when the company makes profits. Moreover, preferred stock shareholders are accredited to be the first when the company comes to an end.
  • Domestic Stocks: These stocks are issued by Indian companies. Domestic stocks are a better option to pick if you are planning to strengthen your stock portfolio. These stocks also generate greater returns in case the dollar surpasses the foreign currency. You can find domestic stocks trading on Indian stock exchanges such as Bombay Stock Exchange (BSE) or National Stock Exchange of India Ltd. (NSE).
  • International Stocks: One way to participate in foreign markets is through investing in international stocks. International stocks, as the name suggests, are stocks of a foreign company. These stocks are issued outside the Indian market. Several investors show their interest in international stock markets via Mutual Funds as well. Some examples of international stocks that can be purchased through India are Apple, Facebook, Alphabet (Google), etc. These help further diversify one’s portfolio.

To Sum Up:

There are myriad stocks of different classes with different purposes in the stock market. Out of the pool of available stocks in the market, picking the one is a difficult task in hand for any investor. Sometimes, even after selecting the stock, investors have a limited understanding of its offerings. One way to deal with such issues is by knowing in-and-out about the stocks you're investing in. Another essential thing to remember is to never put all your money into one stock. Always prefer a diversified strategy and include stocks of numerous classes and varieties, both domestic and international, to build a strong portfolio. If you wish to get into stock market trading, seek out a credible financial services company to take you through the process.

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