What Are The Different Types Of Stocks Available?
Stocks as a part of the stock market are classified based on different parameters - ownership rules, market capitalisation, dividend payments, risk and price trends. The Bombay Stock Exchange and National Stock Exchange are the two leaders in the field.Ownership rules: Preferred stocks ensures its investor a fixed amount of dividend at the end of every year while a common stock is uncertain in this aspect.
Preferred stocks always are a priority over common stocks but in cases of liquidation of a company or voting rights, common stocks win the game. Hybrid stocks are a sort of preferred stock with an open choice of converting it into common stocks at a given time. They are also called as convertible preferred shares.Market capitalisation: Market capitalisation is the determination of the market the value of the total amount of share holding of a given company - Small capitalisation, mid capitalisation and large capitalisation stocks. As the name suggests, the classification is based on the size of capitalisation.
Small capitalisation stocks usually represent small size companies upto a range of Rs. 250 crores. Mid capitalisation stocks fall in the bracket of R. 250 crore to R. 4000 crores and large stocks represents the industry rulers like the Tata, Reliance or ICICI. Investors or stock brokers usually go for small capitalisation stocks considering the gains yielded over a long time and less risk value. Mid stocks represent the well known companies in the market. Growth of large stocks are slower when compared the small stocks but gives way for exploring new business opportunities.Dividend payments: Dividends are the returns one gets until the time the shares are sold for a profit. Income stocks are the ones which pay a dividend higher than the share price.
These are less risky stocks to invest in but lesser growth value. Whereas, growth stocks are the kind that may or may not pay high dividends. The companies usually put back their money into the company operations resulting in higher growth rate.Price trends: Price trends refer to the stocks prices in comparison with the company's earnings. Cyclical stocks are the kind whose value vary with the economic trends, booms or slows down. Defensive stocks are the ones who are almost unaffected by the economic trends like companies dealing with food, drugs and beverages.Risk: Stocks are also chosen based on the risk value associated with it. Blue chip stocks are the ones associated with stable companies which promise a regular dividend to all its investors and beta stocks are the ones which can have a fluctuating value in comparison with the market but can also yield high profits with smart dealings.
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