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A Look at the Most Popular Stock Types

The stock market can be a confusing concept to understand. In a nutshell, a stock is partial ownership of a company that comes in the form of shares. If the value of a stock increases, an investor will see a payout for that stock in the form of a dividend. There are numerous types of stocks, each with different risk levels. Below is a list of the most popular types of stock to invest in. 

Common Stock

As its name indicates, common stock is the most recognized type of stock. While this stock type not only gives investors an ownership share in a business, it also grants the power to vote on certain company endeavors, like organization policies or leadership elections. Long-term earnings of common stock are driven by the company's overall success, meaning if it succeeds, investors see larger payouts. Investors with common stock also receive payouts in the event of a company’s closure, although not until after those with preferred stock receive theirs.  

Preferred Stock

Preferred stock is more similar to a bond than a traditional stock. Unlike common stock, investors of preferred stock do not have the power to vote on company endeavors. However, preferred stockholders receive payouts sooner than those with common stock. This also means those with preferred stock are repaid first in the event of a company’s dissolution. Another thing that sets preferred stock apart is that there’s less of a risk involved when compared to investing in common stock. That said, the chance to earn substantial gains is also lower. 

Growth Stock

Typically, growth stock investments grow at a quicker rate than other stock options on the market. Growth stock investments also have the potential to produce some of the highest returns for investors. These stock types tend to do their best during times of economic growth and when interest rates are low. Although growth stocks can see large payouts, their prices can also be bid to overvalued amounts, which can lead to disappointing returns. Even so, investors of tech companies like Tesla and Apple have seen decent payouts of their growth stocks over the last several years.

Value Stock

Unlike growth stocks, value stocks typically see lower rates of growth than other stock options. Despite this, their payouts are still enticing to investors, as their lower rates are generally not reflective of a company’s overall success. While growth stock can be bid to overvalued amounts, value stock can fall to undervalued amounts, meaning investors can rack up a decent payout for a low cost. This, in turn, can lead investors to a decent payout for a low cost. Given that these stock types have lower growth rates, they tend to do their best during times of economic recovery. 

Large-Cap Stock

Also known as blue-chip stocks, large-cap stocks are investments from well-established companies worth $10 billion or more. Companies that offer these stock types have a history of producing profitable payouts and are often part of the S&P 500 stock market index. Walmart, Microsoft, and Exxon-Mobil are prime examples of companies that offer large-cap stock. Similarly, mid-cap stocks are offered by companies that are still in their initial stages of growth, meaning their values have the potential to appreciate. They also carry more risk, as these companies are not fully established and are more likely to dissolve as a result. More so, small-cap stocks can be some of the most rewarding investments out there, but carry an even higher risk than large-cap and mid-cap stocks. They’re offered by companies that are in their earliest stages of growth, which can sometimes create hidden treasures within the stock market. That said, they’re also the most vulnerable of the three in the event of an economic downturn. 

Before purchasing stock, it’s a good idea to research the companies you intend to invest in. It’s also wise to diversify your investments, as you don’t want to be over-reliant on a particular stock type or company. Above all, remember that stocks carry risk, and you’re never guaranteed a profitable payout. Happy investing!

Hunter Morrison

Hunter Morrison

About Hunter Morrison

Hunter has freelanced for various print and radio publications across Northwest Florida, including The Bay Beacon, Navarre Press, Inweekly, Crestview News Bulletin, and WUWF. He was also the Editor in Chief of the University of West Florida’s student newspaper, The Voyager. In 2023, Hunter moved to Kenai, Alaska to take up a news reporting position with KDLL Public Radio. For fun, Hunter enjoys cross-country skiing, hiking, photography, thrifting, traveling, and looking for the best Thai food around. 

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