The varying types of stock are what confuse most brand new investors. That bewilderment causes people to turn away from the stock market altogether, or to make imprudent investments. If you are going to play the stock market, you will need to know precisely what choices of stock are available and what precisely it all means!

Common Stock is a term that you will hear pretty often. Any individual can purchase common stock, irregardless of age, source of income, or financial standing. Common stock is in essence part ownership in the business you happen to be investing in. While the venture grows and earns wealth, the value of your stock goes up. On the other hand, if the firm does not do well or goes bankrupt, the price of your stock falls. Common stock holders do not participate in the day to day functions of a venture, but they do have the power to select the board of directors.

Along with common stock, there are also different classes of stock. The distinct classes of stock in one firm are often named Class A/Class B. The first class, Class A, essentially gives the stock owner more votes for every share of stock than the buyers of Class B stock. The means to create distinct 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 choice of stock is of course Preferred Stock. Preferred Stock is not really exactly a stock. It is a combination of a stock and a bond. The owner’s of preferred stock could lay claim to the assets of the venture in the case of bankruptcy, and preferred stock holders get the proceeds of the profits from a company ahead of 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.

For additional data about investing and the stock market and how the whole thing works, do an Internet search of terms and phrases like reverse mergers, reverse merger and raise capital. That will give you deeper insight into all the various aspects of investing.

Filed under: Day Trading • Investing • Personal Finance • Stocks Mutual Funds • Wealth Building

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