A stock is an investment into a public company. When a company sells shares of stock to the public, those shares are typically issued as one of two main types of stocks: common stock or preferred stock. Here’s a breakdown.

Common stock

In case you are a novice to investing in stock and wanting to get a couple of shares, you likely need to purchase common stock, that is precisely what the title suggests: the most prevalent stock type. If you have common stock, you have a share in the company’s profits along with the right to vote. Common stock proprietors might also generate dividends – a transaction made to inventory owners on a regular schedule – but those dividends are generally varying and never guaranteed.

Preferred stock

The other primary stock type, preferred inventory, is often compared to bonds. It usually pays investors a fixed dividend. Preferred shareholders also obtain preferential treatment: Dividends are actually given to preferred shareholders before everyday shareholders, which includes in the situation of liquidation or bankruptcy. Preferred stock prices are much less volatile compared to typical stock prices, that means shares are much less susceptible to losing worth, though they are additionally less susceptible to gaining worth. Generally, preferred stock is ideal for investors that prioritize earnings more than long term development.

Different Types of Stocks

The primary stock types are preferred and common. Stocks can also be categorized by organization sizing, industry, geographic place and style. Here is what you ought to understand about the various stock types.

US Stocks