Stock Types Broken Down

How Many Types Of Stock Are There?

There are a lot of different types of stock available out there, but some are more readily available than others.

Common Stock

Just as the name implies, this is the most common type of stock out there. Each share entitles you to a percentage of dividends at the end of the year. This dividend is based on how much of a share of profits stockholders are entitled to that have invested with the company.

Those that hold common stock are entitled to one vote per share they hold when it comes to electing board members to the company. These board members are the representatives of the common stockholders and thus have the power to vote on key issues that can affect profits and dividends in the long term future. Individual stockholders of common stock are not allowed to make decisions themselves, so it is important that they carefully consider who they are voting for.

Common stock holders are not paid until creditors, bondholders, and preferred shareholders are paid. At the same time, this is the least expensive stock to purchase, so there is something to be said for that if you want to invest with little money.

Preferred Stock

A preferred stock often means that those that invest have a guarantee that they will get at least a minimal dividend each year. These shares cost more to invest initially due to the low level of risk and the voting power that the stockholder can exercise.

It is harder to purchase preferred stock then it is common stock because companies usually only offer a limited number of shares. One advantage of preferred stock is that in the case of a company liquidation, those holding preferred stock receive their money before the common stockholders. In some cases, this can mean getting something back or nothing at all if you are just a common stockholder.

Customized Stock Options

Some companies have rules that go beyond the normal course if they have specific goals. For example, if a firm wants control of a company to stay with a particular group of investors then they may limit voting rights of common stock holders or have very detailed rules for each level of stock they offer.

It is important to be clear on the specifics of the stock you are considering purchasing so that you are not disappointed in the future. Restrictions on the stock can make them easier or harder to sell depending on market factors. These types of stock often have classes, usually just referred to as Class A and Class B. A financial planner or stockbroker can help you find these types of stocks because they can be a bit challenging to find on your own. A professional can also keep you informed when a lucrative stock presents itself.

Getting Good Advice

You don’t have to be experienced or have a lot of assets to start investing in stocks. One way that many people get started in the stock market is setting up an initial appointment with a financial planner or stock brokerage firm.

Get some advice on advisers

Many banks offer some level of investing or financial planning. If you have a trusted family lawyer or accountant, they may be able to suggest a suitable person to meet your investment needs. These pros will ask you a lot of questions and determine your overall financial picture. A good planner will listen to your exact needs and create a portfolio that will have the best chance at meeting your goals.

Everyone is different, and the type of portfolio you want to build is going to need to be based on your future needs such as planning for college for your children, starting a business, or planning for retirement. Financial planners can also help you find insurance to help cover your debts and expenses as you age thus preserving your wealth so you can pass it on to those you love.

Before you meet with a planner, it is critical to reassess what goals you have for the future. The more information you bring to your initial meeting the easier and faster it is going to be for your planner or broker to help you meet goals. Any existing stock, bank accounts, real estate, or other valuables should be made available in a spreadsheet or list ideally.

Diversifying Your Portfolio

Having a diversity of investments is important when it comes to long-term financial success. By diversifying assets, you spread risk out. This means you may hold stock in many different types of companies and services. If one area of your portfolio is not performing well, then you can more easily recover from the losses since you have other assets. In many cases, the other stocks that are performing well may still result in an overall net gain for you in the long term future.

Even those with established portfolios of stock should look over their holdings on an annual basis with their financial adviser. It is all too easy to let things be and miss out on lucrative investment opportunities.

stock market portfolio

Keeping Your Options Open

When it comes to trading stock, it is important to keep your options open because you never know when you might run into the next best thing. Savvy investors can make substantial returns. There was a point when even Microsoft or Apple stock was low enough to be a buyers market. Those that entrusted their money to these entrepreneurs are still being rewarded even in today’s challenging financial times.

Reading financial news and keeping an eye on market trends allows you to be more aware of the opportunity. While you may not have the time to read daily, at least taking a glance at the market news on a weekly basis was firmly recommended for anyone that is invested or planning on becoming invested. A more informed investor is setting themselves on the path to financial success. Check back with us often for the latest financial advice and informative articles. Taking the time to learn more about different stock picking services and strategies is worth it.

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