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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 stock.
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. Learn how to invest like Buffet.
Disclaimer: The information provided
here is only for informative purposes and nothing more. It is not in any
way to be construed as authoritative. Always consult your financial advisor
before taking any decision. It is informed to the people that this
information that is provided here is not to be acted upon. In spite of our
advise, if any person acts upon the contents of this web site and incurs a
loss, they do it on their own risk. We are not to be held responsible for
any loss, incorrect information etc.
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