Most Popular Types of Stocks

Stock investing is the talk of the town now, eh? Everyone’s doing it: your cousin, your friend’s friend and even your dad is starting to spend some extra time reading about daily stock exchanges.

Want to learn a bit more?

Stay tuned as we take a deep dive and describe some of the most popular types of stocks today. If anything, you’ll have a decent conversation starter for your next family dinner.

Let’s go!

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What are the Most Common Types of Stocks?

The dynamic nature of the stock exchange world makes it hard to keep track of its constant shifts. However, some things are constant and we’ll go over them right now.

So, what are the different types of stocks?

Let’s check them out!

Common Stock

When it comes to types of stock trading, common stock is equity that represents ownership in the company. As a common stock, it entitles its owner to vote on major matters at shareholders’ meetings and receive dividends if there are any profits made by the corporation.

This form of securities mostly comes from publicly held companies or organizations that have already been approved by the government to offer them. When you purchase common stock, you become a part of the company and are given certain shareholder rights.

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Preferred Stock

Preferred stock is another type of security that represents ownership in a company. Preferred stockholders are paid dividends before common stockholders and have priority if the company goes bankrupt. In other words, they are higher in the pecking order.

It’s not that different from common stocks, but the main difference between these two stock types is that preferred shareholders don’t usually have voting rights.

Large-cap Stocks, Mid-cap or Small-cap Stocks

The size of the company in question is a determining factor in categorizing the different types of stocks.

Large-cap stocks are generally the most well-known and established companies on the stock market. Their size usually ranges from $10 billion to $200 billion.

Mid-cap stocks are companies whose size ranges from $2 billion to $10 billion. They are considered to be riskier than large caps but less risky than small caps.

Small-cap stocks are the most volatile and risky type of stock shares. The companies are usually small startups with no guarantee that they are going to make it. They can be a great investment if you’re willing to take on the risk, but they can also go bankrupt just as easily as they can make a fortune.

You may be interested: What is DRIP Investing?

Domestic and International Stocks

This specific categorization concerns the location of the headquarters of the company being traded with.

Domestic stocks are those that are traded on the home market, while international stocks are traded on foreign markets.

The main difference between the two types of shares is that domestic stocks are subject to the laws of the country they’re traded in, while international stocks are subject to the laws of the country they’re traded in and the foreign market.

Growth or Value Stocks

Are you looking for guaranteed growth or a potentially high value?

Growth stocks are shares in companies that are expected to have higher earnings in the future. They are riskier than value stocks but may offer a higher return.

A value stock is actually an undervalued stock. More specifically, this is the share in companies are the ones that are currently undervalued by the market. Naturally, they are less risky than growth stocks, however, they may offer a higher return.

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IPO Stocks

An IPO, or initial public offering, is a company’s first offer of stock to the general public. When a company goes public, it sells stock shares to the public and becomes listed on a stock exchange.

IPO stocks are often seen as a good investment because they are issued by young, growing companies. However, there is no guarantee that the company will grow and make money.

Dividend Stocks

A dividend stock is an equity share that offers regular payouts to shareholders. These payouts can come in the form of cash, shares of the company, or other assets.

So, how do dividends work?

Dividend payments can be a great way to make money off of your stock investments, however, not all dividend stocks are created equal. You’ll want to be careful to choose stocks that offer healthy payouts and are likely to continue paying them out in the future.

You also want to make sure that the company is in good financial shape and is likely to remain profitable.

Income Stocks

Income stocks offer a steady stream of income to their shareholders. These stocks are usually less risky than other types of stocks and can provide a reliable stream of income.

They can also come in the form of dividends, interest payments, or rent payments. They’re actually a great investment for the types of stock traders who want to generate a regular income.

Cyclical or Non-cyclical Stocks

Cyclical stocks are equity shares in companies that are sensitive to the economic cycle. They tend to do well when the economy is doing well and poorly when the economy is doing bad.

Non-cyclical stocks, on the other hand, are stocks in companies that are not affected by the economic cycle whatsoever. They, on the other hand, tend to do well regardless of the economic climate, which in turn makes them a safer investment than cyclical stocks.

ESG stocks

What does ESG stand for?

ESG stands for environmental, social, and governance and these types of stocks are usually companies that have a commitment to environmental and social issues. These companies typically have a lower risk of financial instability and are more likely to be profitable in the long run.

ESG investing can be great for people who want to make a difference in the world while also making a profit.

Blue-chip Stocks

Blue-chip stocks are types of stocks that appear in some of the largest and most well-known companies in the world. They are seen as a safe investment because they are less likely to go bankrupt than smaller companies.

Blue-chip stocks typically offer a low return, but they also provide a low risk as well.

Penny Stocks

Penny stocks are stocks types that are worth less than $5 per share. They’re typically issued by small, unestablished companies and thus present a high-risk investment.

Penny stocks can be a great way to make a lot of money, but there is also a lot of risk involved. You’ll want to be careful to only invest in stocks that offer healthy payouts and are likely to continue paying them out in the future.

Most Common Categories of Stocks

Now that we’ve established the nature of stocks, let’s go over some of the most popular categories of businesses that have been catching the investors’ eyes lately.

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Communication Services

When it comes to communications services, we’re usually talking about telephone, internet, media, and entertainment companies.

These types of businesses can be a great investment because they are typically growing companies that offer a lot of potential for future profits. However, as with most stock categories, there is no guarantee that all of these companies will be successful in the future as well.

Consumer Discretionary

Consumer discretionary stocks are companies that sell products such as cars, clothing, and accommodation. These stock types can be a great investment because they are typically growing companies that offer a lot of potentials.

Consumer Staples

Consumer staples stocks are companies that offer necessities such as food, beverage, household and personal items and even tobacco and alcohol. These stocks are seen as a safe investment because they are less likely to go bankrupt than other, more volatile stock categories.

Energy

Energy stocks offer oil and gas exploration as well as production companies, pipeline providers, and gas station operators. Investing in these stocks is considered positive because the energy industry is typically growing and has a lot of potential for future profits.

Financial

Financial stocks are usually offered by companies such as banks, mortgage finance specialists, and insurance and brokerage companies. They are also seen as one of the safest investments due to the constant necessity of the services they offer.

Further reading: Banks to Invest in

Healthcare

Healthcare stocks types include health insurers, drug and biotech companies, and medical device makers. This type of stock has a lot of potential yet to be unravelled which makes them one of the most popular and sought-after stocks at the moment.

Industrial

Industrial stocks may include airline, aerospace and defence, construction, logistics, machinery, and railroad companies. These equity shares are known to bring a lot of money to their shareholders, making them a popular pick among investors.

Material

Companies that work with mining, forest products, construction materials, packaging, and chemical technology have been paving the way to technological advancements ever since the first industrial revolution.

Logically, companies that offer material types of stocks are now some of the most popular out there.

Further reading: Graphene Stocks to Invest in

Real Estate

REITs are some of the most popular real estate stocks. These are companies that own, operate, or finance income-producing real estate.

Real estate management and development companies on the other hand are typically riskier than REITs because they are more likely to go bankrupt.

However, they offer the potential for greater profits if they are successful. As with most stock types, it is important to do your research before investing in order to minimize your risk.

Further reading: How to Invest in Real Estate?

Technology

Technology is the number one business opportunity in this day and age. Hardware, software, semiconductor, IT services as well as communications equipment types of stocks are naturally some of the most common ones today.

Utilities

Electric, natural gas, water, renewable energy, and multi-product utility companies are also up for grabs today, as their services are deemed futurist and extremely potent in terms of profits.

Finishing Up

There you have it, some of the most popular and most common types of stocks, summed up in a single list.

We hope to have given you deeper insight as well as some useful information regarding the various stock types out there.

What’s left for you now is to pick a branch and invest away!

FAQ

What are common shares?

Common shares are the most basic type of stock. They give the owner a share in the company and the right to vote on important matters. They also typically have a higher risk but offer the potential for greater profits if the company is successful.

What is yield in stocks?

When it comes to yield, it is simply the amount of money a company pays out to its shareholders in dividends over a certain period of time. This can be an important factor to consider when looking at different types of stocks, as it can indicate how profitable a company is and how much money shareholders can expect to receive.

ABOUT AUTHOR

Despite her formal background in linguistics, Maja has always been fascinated by the world of finance. She has spent years and years analyzing the market, including trades, investments, pitfalls to avoid as well as the stock exchange. As of recent, she has been studying some non-mainstream stocks in Canada. When I’m not immersed in numbers, I like to spend time with my dog and plan my next trip.

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