What are stocks? A company divides its equity into small parts (stocks) and places them in the stock market for investors to buy. So, if you buy a company’s stock, you technically own a fraction of that company. When the company grows, your stock value goes up. You then sell your stock at a higher price to earn profits. This article discusses the different kinds of stocks traded in the stock market.

Types of stocks
Several types of stocks are traded on the stock market. They vary in terms of which company offers them, their market stability, whether or not they provide dividends, and other factors.

Common and preferred stocks
Buying common stocks gives you partial ownership of a company. If the company shuts down, you are entitled to its assets proportional to the shares you owned. Preferred stocks work the same way. The only significant difference is that preferred shareholders get precedence over common shareholders in the event of dissolution. They also get dividends before common shareholders. Most companies, however, offer only common stock.

Large-cap, mid-cap, and small-cap stocks
Companies can be large-cap, mid-cap, or small-cap depending on their market capitalization (the total worth of all their shares). Naturally, stocks of companies with the highest market capitalizations are called large-cap stocks. While there is no pre-established bracket, companies with stocks over $10 billion are usually large-cap, between $2 and $10 billion are mid-caps, and below $2 billion are small-caps. Stocks of large-cap companies are the safest and most conservative, but mid and small-cap stocks have more potential for growth and are consequently riskier.

Domestic and international stocks
Depending on the company’s official headquarters’ location, stocks can be domestic (within the country) or international (from other countries). Since companies located in a particular country may target another country’s population and have their production plants elsewhere, it’s not easy to tell whether the stock is domestic or international from business operations and financial metrics.

Dividend and non-dividend stocks
Dividend stocks offer dividends to shareholders after set time intervals, making them highly sought after. However, it may be just a tiny amount that keeps changing depending on the company’s performance. Non-dividend stocks don’t offer dividends, and such shares are profitable only if their prices rise over time. While many companies now provide dividends, you must check the nature of the stock before investing.

Cyclical and non-cyclical stocks
Stocks are also categorized depending on the nature of the industry. Cyclical stocks are companies that rely on national economies and are subject to sharp rebounds like manufacturing or travel. On the other hand, non-cyclical or secular stocks don’t have dramatic swings in demand and perform better during market downturns, though they earn less during upswings.

Safe stocks
Apart from the above, a vital stock type to be familiar with is safe stocks. These have relatively low volatility and are stable in the stock markets. Safe stocks come from industries less susceptible to general economic changes. The cherry on top is that they often pay dividends.

Safest stocks to invest in
2022 has been tricky for investors so far, and it’s not the best time to put your money in the stock market. However, as mentioned, certain safe stocks are relatively stable.

Berkshire Hathaway
Berkshire Hathaway is a conglomerate of about 60 businesses spread across multiple industries, including transport, insurance, and battery manufacture, most of which are non-cyclical.

Vanguard High-Dividend Yield ETF
This is an exchange-traded fund that pays above-average dividends.

Walt Disney
This is a well-known brand with excellent stocks, bound to have increased value despite international economic instability.

Procter & Gamble
The company sells products needed in all economic climates; from Pampers to Downy and Old Spice, P&G owns it all.

Apple
Apple may have pricy products, but the company can pay you back with stable and highly valued stocks.

Investors, traders, investment analysts, and even some of our well-informed friends often talk about the stock market and all its ups and downs. We hope this article helped you grasp the topic in some way. It’s best to do further research and speak to an expert before you finally dive into this world of trade and commerce.