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Whenever you buy a part of the company you are provided with a stock or a share that says that you are now the part of the company and you can make decisions. There are different types of stocks that you can buy when you are starting your career as an investor. Investors have different goals in their minds whenever they are trying to buy any type of stock and there are stocks which are distinguished based on the end goal of the investor. You will first have to determine your end goal and then you can decide the type of stocks that you want to buy. You can check out the details given below to know more about the types of stocks in India and decide whether or not you want to start your investment.
What Are Stocks?
Stocks are the backbone of the share market because it is one of the major things that you need to know about while you are working towards becoming a successful investor. There are different types of stocks available for the different types of people who are willing to be a part of the share market or stock exchange in their particular country. The companies who are making their shares available to the common public will provide different types of stocks and the investors must have proper knowledge related to the different types of stock so that they can invest in the correct stock and become successful investors. Common stocks are the most basic types of stocks which are available by various companies in the share market. When you have a common stock of the company then you get the right to vote on vote members and other corporate issues related to the company’s annual meeting. One share equals one vote at the meeting.
Types of Stocks in the Stock Market
There are a lot of different types of stocks available in the stock market and the stocks are distinguished upon the type of a dividend, ownership, market capitalization and other parameters so that the investors can understand the concept of stocks and the stock market in a better way. You can check out the various details related to the types of stocks available in the stock market from the headers given below and start your journey in order to become a successful investor today. The investors must have knowledge related to the parameters on which the stocks are divided and take into account their first investments accordingly.
Common And Preferred Stock
There is not much difference between common stock and a preferred stock but the dividend will be paid successfully to the person having a preferred stock. If you have a preferred stock then it will provide you with a promise that a fixed amount will be paid as your dividend each and every year however if you have a common stock then it does not come with the promise of paying the dividend every year. A preferred stock person will enjoy greater priority when it comes to surplus money in the company.
Some companies also provide hybrid stock to investors. Hybrid stock can also be termed as preferred stock but it comes with the option to get converted into a fixed number of common stocks at a specific time. In similar terms, you will be able to convert your preferred stock into common stock over a period of time and this stock is called hybrid stock. It can also be called convertible preferred shares however you will or will not have the voting rights as you have while you have common stock in a company. The rules depend upon the company that is providing these stocks.
When you have a stock with the smallest values in the market then it will be called small capitalization stock or small-cap stock. These stocks are issued by small size companies with a market capitalisation of up to Rs 250 crore. If you are a beginner then these stocks will be able to help you get gains in the long run because small companies have the potential to grow rapidly in the future. If you want to buy a stock for a long-range then you can prefer it however small-cap stocks that can also decline without any warning.
Mid Cap Stocks
Mid-cap stocks are typically stocks of medium-sized companies with a market capitalisation in the range of Rupees 250 crore and Rupees 4000 crores. These stocks are available from well-known companies and they will provide you with the advantages of getting good growth potential. You will also be provided with stability however the growth of the company will be steady and not fast.
Large-cap stocks are available for the largest companies in the market including Tata, Reliance, and ICCI. These are big enterprises and the potential for growth can be small because of the large size of the stock. The investors will be getting higher dividends and this can also be termed long-term preserves.
If you want to get a stock which has a higher dividend in relation to its share price then you can take into account income stocks. A higher dividend will mean higher income and these types of stocks are called income stocks. Income stocks are presented by stable companies and preferred by investors who are looking for a secondary source of income. Investors are not liable to pay tax for their dividend income in these types of stocks.
If you are looking for growth then you can take into account the growth stocks which will imply the growth of the company at a faster rate. The company will grow at a faster rate and the value of the share also rises in the meantime then the investors will have a higher return when the stock is sold. But the investors will not be able to earn money through dividends because the dividend of these companies will be less as compared to the companies which are putting out Income stocks.
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