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Types of Stocks

“Research shows that owning stocks of as few as a dozen large companies in different industries can offer you the benefits of diversification.”

- Nancy Lloyd, author of
Simple Money Solutions

The most basic definition of a stock--part ownership in a company--doesn’t begin to explain the myriad variances among different types of stock. The following is a primer to help you differentiate one type from another:

Common Stock: the basic definition that refers to ownership in a company.

Initial Public Offering (IPO): the first time a stock is available to be sold to the public to help generate assets to finance the company’s growth.

Growth Stock: stock of a company that focuses on growth through the reinvestment of dividends rather than paying them out to shareholders.

Preferred Stock: a special category of company stock that pays a higher dividend than common stock to its shareholders and affords them certain voting privileges.

Convertible Stock: preferred stocks that may be converted into common stocks.

Value Stock: also known as under-valued stocks that trade at a lower price than the company’s reputation, earnings outlook, or financial situation would seem to merit. Most value stocks pay out greater profits to shareholders in the form of dividends and place less emphasis on growth.

 What is a Stock?

 Types of Stock

 

 Stock Terminology

 

 How to Research Stocks

 

 When to Buy and Sell

 

 Costs Associated with Stocks

 Tax Issues

 

 

 

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