How Many Types Of Stock Are There For Investing?

Stock market investing is an excellent way for individuals with a long-term perspective to build wealth. You need not be a financial expert for share market investing, but knowing different types of stocks is good for picking suitable stocks to meet your financial goals. Every stock may not get aligned with your set goals. 

Types of stocks for investing

Following are the different types of stocks:

1. Large-Cap, Mid-Cap, and Small-Cap Stocks

• Large-cap stocks are the blue-chip stocks – shares of companies with a valuation of above Rs.4,000. These are the top 100 companies on exchanges as per SEBI’s rules. The share price of large-cap stocks remains stable even during a volatile market. Large-cap are less risky as compared to mid and small-cap stocks. Therefore, they are preferred by conservative investors. 
• Mid-Cap Stocks: These are the shares of Mid-cap companies ranked 101 – 250 on stock exchanges. The market cap is Rs. 250 – 4,000 Crores. These have a good track record of steady growth and the potential for further growth compared to large-cap companies. They are in seasoned players’ Demat accounts for portfolio stability.
• Small-Cap Stocks: These are the stocks of companies with a market cap of less than Rs.250. These companies are ranked 251st onwards. These companies possess a high potential for future growth. Long-term investors looking for high growth in share value and who are not very particular about the present dividend cycles can consider these stocks. 

Like many investors, you can prefer a discount stockbroker to save on Demat account maintenance charges.

2. Common Stocks and Preferred Stocks

• Common Stocks: Common stockholders possess voting rights also for corporate decisions and get a share of the company’s profits. Common stockholders can earn dividends, but they are not guaranteed. Common stockholders are paid last if a company goes bankrupt.  
• Preferred Stocks: Preferred stocks do not possess voting rights for their shareholders. They can get guaranteed dividends. Preferred stockholders will get priority to be paid over common stockholders if a company is in a position of insolvency.

3. Growth Stocks and Value Stocks

• Growth Stocks: Growth stocks reinvest the profits in their projects and usually do not offer dividends. With a reinvestment of earnings, companies can grow faster. Here investors can earn through a rise in stock price. 
• Income Stocks: These are also called dividend-yield stocks. These stocks distribute a higher dividend concerning their share price. These stable companies distribute consistent dividends but do not have high-growth potential. The stock price may not increase much. These are low-risk stocks.

4. IPO Stocks 

When a company issues its shares to the public for the first time through the IPO (initial public offering) process, these shares are called IPO shares. IPO is big news in the market as every company cannot issue IPOs. There are specific conditions defined by the SEBI (Securities Exchange Board of India) that a company has to meet to issue an IPO. IPOs tend to generate a lot of excitement among investors. IPO stocks bring the opportunity to make significant profits in the short-term as well as the long term. But they pose a huge risk. From a safety standpoint, investors must evaluate the company’s financials.

Thus, stock investing is the way to gain inflation-beating returns in the long run. This classification will help you to opt for the right type of stock as per your set financial goals.