SIA Investor - Your Path To Financial Knowledge
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  Stocks
  1. What stock is
  2. Types of stock
    • Market capitalization
    • Performance cycles
    • Growth & income
    • P/E ratio
    • Defensive vs. cyclical
  3. Value
  4. Making money
  5. Research & evaluation
  6. Buying & selling
  7. Buying styles
  8. Short-term strategies
  9. Risks
  Related topics
  Mutual funds
  Asset allocation
  Diversification

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Types of stock

With thousands of different stocks trading on the U.S. and international securities markets, there are stocks to suit every investor and to complement every portfolio. For example, some stocks stress growth, while others provide income. Some stocks flourish during boom times, while others may help insulate your portfolio’s value against turbulent or depressed markets. Some stocks are pricey, while others are comparatively inexpensive. And some stocks are inherently volatile, while others tend to be more stable in value.

Common vs. preferred

While most of the stock issued in the U.S. is common stock, some companies also issue preferred stock.

If you buy common stocks, you share directly in the success or failure of the company. If the company grows or realizes a profit, your income from the stock may increase, or the share price may climb. On the other hand, if the company has a disappointing year, your investment in the company will probably be disappointing as well. If the company goes bankrupt, you could lose your entire investment.

Preferred stocks reduce your risk — but also limit potential reward. The dividends paid on preferred stocks are fixed and guaranteed. You may even get some of your investment back if the company goes bankrupt. However, if the company grows or realizes a profit, your dividends stay the same and the share price increases more slowly than shares of the company’s common stock.

 
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Stocks in large, well-established companies that have a solid record of increasing profits and paying dividends are known as blue chips — after the most valuable poker chips. It's not an official designation, and the list does change from time to time.

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