The varying categories of stock are what confuse most novice investors. That confusion causes people to turn away from the stock market forever, or to make foolish investments. If you are going to play the stock market, you must definitely know precisely what types of stock are attainable and what it all means!
Common Stock is a term that you will hear really quite often. Any individual can purchase common stock, regardless of age, wages, or financial standing. Common stock is in essence part ownership in the business venture you are investing in. As the company matures and earns revenue, the value of your stock goes up. On the other hand, if the venture does poorly or goes bankrupt, the price of your stock falls. Common stock holders do not participate in the day to day operations of a business venture, but they do have actually the power to select the board of directors.
Alongside common stock, there are also varied classes of stock. The different classes of stock in one company are often called Class A/Class B. The first class, Class A, in essence delivers the stock owner more votes per share of stock than the buyers of Class B stock. The means to create different classes of stock in a corp has existed since 1987. Many investors avoid stock that has more than one class, and stocks that have more than one class are not named common stock.
The most upscale variety 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 can 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 are convinced that you may prefer this Preferred Stock, be aware that the firm normally has the right to buy the stock back from the stock owner and discontinue paying dividends.
For additional data about a different type of investing in the stock market, do an Internet search of terms and phrases like reverse mergers, reverse merger and raise capital. This will give you deeper insight into a different component of investing.
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