Types Of Stocks
Stock is any of the stocks held by an entity that has become a public company. In American English, all the stocks are collectively referred to as “stock””. Each share of stock represents a fractional ownership in percentage of the whole stock. Shares can be fractions of a whole share or a whole issue of stock.
In general, stocks are listed on stock exchanges and traded on futures exchanges. The major exchanges are NYSE, NASDAQ, AMEX and NASDAQ. These are just some of many worldwide stock exchanges. Stocks are sold in the open market either directly to the public or via broker dealers. There are stock exchanges in Canada and Hong Kong also.
The two main types of stocks are common or ordinary and preferred or exclusive. Common stocks are issued by corporations as a way to raise funds. The profit made by the corporation is used for paying debts and other expenses. Ordinary shares are issued by the corporations for sale to the general public. It is the right of the shareholders of that corporation to sell their stocks to other shareholders for a profit.
Stock holders have the right to dividends which are paid by their corporation to its shareholders every quarter. The dividends are paid as profits on the sales of existing stocks by the corporation. There can be no restrictions on the distribution of dividend.
Growth stocks are issued by corporations to new investors and also to existing shareholders. These stocks are typically used as part of the initial public offerings (IPOs). Growth stocks are traded on U.S. exchanges. The companies can issue these types of securities to meet their requirements for listing. There can be restrictions on the right of future buyers to pay dividends as well as on the rights to capital appreciation.
There can be two main types of stocks, common or ordinary, and preferred or exclusive. Common stocks are issued by corporations to individuals. Preferred or exclusive stocks are issued by the corporation to new shareholders. There can be restrictions on the right of the shareholders to dividends and on the right to capital appreciation. Some stocks are traded on U.S. exchanges and are traded between different types of investors.
There is a third type of stock, a security. Security stocks are normally traded on U.S. exchanges but also are traded over the counter (OTC). OTCs are Over the Counter Exchange systems that allow traders to trade stocks without needing to go through a broker. Some OTCs include New York Stock Exchange (NYSE) and NASDAQ. Security stocks have a minimum price and are usually regulated by securities laws. These stocks may offer higher dividends than other stocks.
Many people prefer to buy small-scale common stock. These stocks are easy to purchase and sell quickly. The returns on these shares tend to be lower than preferred stock but they can offer a much more secure investment. Preferred stock tends to be issued by larger companies. A company may issue stock to the public in an attempt to raise funds for research or expansion.