Friday, December 24, 2010

Different Types of Stock by Ravinder Tulsiani

Different Types of Stock by Ravinder Tulsiani

The different types of stock are what confuse most first time
investors. That confusion causes people to turn away from the stock
market altogether, or to make unwise investments. If you are going to
play the stock market, you must know what types of stock are available
and what it all means!

Common Stock is a term that you will hear quite often. Anyone can
purchase common stock, regardless of age, income, age, or financial
standing. Common stock is essentially part ownership in the business
you are investing in. As the company grows and earns money, the value
of your stock rises. On the other hand, if the company does poorly or
goes bankrupt, the value of your stock falls. Common stock holders do
not participate in the day to day operations of a business, but they
do have the power to elect the board of directors.

Along with common stock, there are also different classes of stock.
The different classes of stock in one company are often called Class A
and Class B. The first class, class A, essentially gives the stock
owner more votes per share of stock than the owners of class B stock.
The ability to create different classes of stock in a corporation has
existed since 1987. Many investors avoid stock that has more than one
class, and stocks that have more than one class are not called common

The most upscale type of stock is of course Preferred Stock. Preferred
stock isn’t exactly a stock. It is a mix of a stock and a bond. The
owner’s of preferred stock can lay claim to the assets of the company
in the case of bankruptcy, and preferred stock holders get the
proceeds of the profits from a company before the common stock owners.
If you think that you may prefer this preferred stock, be aware that
the company typically has the right to buy the stock back from the
stock owner and stop paying dividends.

About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: