Stocks types differ significantly with different meaning and nature. Lacking knowledge of these types could lead several investors to move away from stock market or make unwise investments. Therefore it is necessary to learn the nature and performance of different stocks.

Common stock is a term heard quite often in the stock market scenario. Common stock can be bought by any investor, regardless of his financial status, income or age. This stock is essentially a part of ownership in the business you are investing. Its value increases with the growth of company and earns profit and declines if undergone bankruptcy or on poor performance. Holders of common stock do not take active part in daily business activity but are provided the power of electing board of directors.

Besides common stock, a stock consists of different classes, commonly termed as class A, B and so on. Class A stock owners are provided more votes per share than B class stock owners. The ability to classify stocks into classes in businesses exists since 1987. Stocks consisting of more than one class are not common stock and are avoided by many investors.

Preferred stocks are the most expensive type of stock. Actually, it is not exactly a stock but a combination of stock and bond. Preferred stock owners have the ability to claim a company’s assets in case of bankruptcy and enjoy proceeds of profit before common stock holders. While investing in preferred stock, it must be remembered that a business has the power to purchase back its stock and stop dividends.

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