Stocks offer various benefits to investors. It offers ownership rights to investors, which means that stockholders gain profits from various ways.
They can either gain from the appreciation of the stock’s value or they receive regular dividend payments from the companies they invest in.
The following are the different categories of stocks and the benefits they give to investors.
Blue-chip stocks are shares that come from large, stable companies. Most of these companies are continually profitable.
Although these companies grow slowly, the earnings that they gather are extremely consistent and therefore dependable for investors.
One downside for these stocks is that they are almost always expensive. But overall, they offer the lowest risks along with an established track record of earnings.
Value stocks are stocks that are practically on sale. That’s because their true values are often lower than current market prices.
Investors view these stocks as stocks that have the potential to appreciate to their true or intrinsic values.
Their prices are considered to be at bargain levels but investors believe that they will become more valuable in the future when the company’s industry improves or the company expands.
Growth stocks are issued by the companies that are seen to have higher earnings. On the other hand, the earnings are typically reinvested back into the business to fund the development.
If they offer dividends, they are usually low. But this doesn’t really weigh too much for the investor since the stock’s value is widely expected to increase as the company grows.
Income stocks share some similarities with blue-chip stocks in that they usually come from well established companies.
The stocks often pay high dividends, and there are times when these dividends include the majority of earnings.
Also, incomes stocks are the least volatile class of stock that offers investors consistently growing income stream. This is one reason why defensive investors prefer income stocks.
Among the industries that provide this type of stocks are energy, utilities, finance, and natural resources.
Cyclical stocks, as the name suggests, are stocks whose values depend on the strength and health of the economy.
In times of economic boom and robustness, these stocks grow largely. On the flipside, economic downturns, turmoil, and uncertainty see these stocks slump and weaken. They usually lose a significant part of their value.
Companies that issue this kind of stocks are found in industries like airline, car manufacturing, and electronics.
Penny stocks are cheap stocks, as implied by the name, with a large amount of risks. More often than not, they trade with no more than $5 per share. Sometimes they can be as low as 2 cents per share.
This kind of stock usually come from small companies and startups that want to raise funds and make money.
Although it carries high risks and is very cheap, a penny stock can reward investors very handsomely in if the issuing company booms. The stock price can increase dramatically.
Learn the basics of financial products and Labrich Trading Strategies by studying the historic events that have shaped our world giving you a better understanding of trading and what drives volatility.