Stocks are a safe haven, offer long-term profit returns and are one of the most preferred investment models in the world in terms of liquidity, which attracts the attention of many investors.
Investors who want to manage their investment portfolios through stocks have different types of stocks in front of them.
Among these, investors should choose the most suitable ones according to their own financial conditions, planning and stock exchange platforms, and it is recommended that they create a diversified portfolio by purchasing different types of stocks instead of a single type of stocks.
The most common stocks types can be listed as follows:
- common stocks
- preferred stocks
- growth stocks
- value stocks
- dividend stocks
- blue-chip stocks
Common Stocks
The most commonly used stock type in stock markets is "common stocks". In this type of stock, investors gain partnership rights in companies that offer these stocks to the market through the stocks they purchase.
Voting rights are also obtained, usually depending on the amount of stocks purchased. Investors who own common stocks become actors who have an impact on the future decision-making processes of companies.
In addition, they can also earn a certain amount of return in terms of profit by being partners in the financial growth of the company. The most popular examples of "common stocks" are the stocks offered by global technology companies such as Apple and Tesla.
Investors generally consider elements such as voting rights and dividend income when comparing "common vs preferred stocks".
Preferred Stocks
One of the most popular stock types, preferred stocks, unlike common stocks, provide periodic dividend income. When shareholders own this type of stock, they do not have direct voting rights regarding the company's future strategies.
However, they receive income from the company's profitability in proportion to the determined rates and the amount of stocks they purchase. Thanks to this income called dividend income, many investors have accessed the passive income method today.
Preferred stocks will be a very good choice for gaining financial freedom. Investors who want less risk are more interested in these stock types due to dividend income.
Growth Stocks
One of the popular stock types that investors are interested in in today's markets is growth stocks. For growth stocks meaning, shares of companies that offer growth potential are usually purchased.
In this type of stock, shareholders do not receive dividend income, but their assets gain value in the financial growth that the company potentially promises.
Companies such as Amazon and Netflix can be good examples of this. Investors who purchased Amazon's stocks, which were offered to the public as an example of growth stocks in the years it was founded, have experienced a large market appreciation today and have experienced a successful portfolio example.
A simple definition can be made to emphasize the meaning of growth stocks: stock types offered by companies with high growth potential in the future.
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Value Stocks
Value stocks definition can be made in the simplest way as stock types whose market price is less than their real value. Low-priced stocks can offer many opportunities for investors who aim for long-term returns.
Low-priced company stocks of well-established companies such as Coca-Cola and IBM can be the best examples of value stocks.
Dividend Stocks
Investors who diversify their portfolios through stocks that can be described as dividend stocks earn periodic dividend income thanks to this type of stock. Since there is no dividend in every type of stock, it may be a good strategy to buy dividend stocks with a portion of the assets in the investment project.
Dividend stocks may be a good choice for the "passive income earning" process, which is a very popular financial trend in today's modern world. Today, dividend stocks of companies such as Procter & Gamble and AT&T are attracting attention.
Blue-Chip Stocks
Although not very popular, blue-chip stocks, one of the stock types that professional stock market investors dominate, are well-established and reliable stock types that have minimal negative effects against market fluctuations.
Microsoft may be the best example of this type of stock. Many investors trust stocks listed in the Blue-chip stocks list more. These are stocks offered by leading companies in their fields and included in indexes such as the S&P 500, which is an important indicator for stock markets.
Penny Stocks
Penny stocks are stocks with a very low market value. With this type of stock, which is usually offered to the market for less than $1, investors should have a slightly higher risk tolerance compared to other types of stocks.
If a beginner investor asks "What are penny stocks?", the clearest answer that can be given to him is "they are stocks that have a really low value but offer high volatility opportunities." Stocks listed by small-scale companies traded on OTC exchanges can be given as an example of this type.
Cyclical Stocks
Cyclical stocks, a unique and original type of stocks, are more sensitive to economic cycles in the market than other types of stocks. They tend to rise in times of economic growth and fall in times of recession.
This directly proportional appreciation rhythm can generally be valid for stocks listed by companies operating in the travel sector. If an investor is comparing "Cyclical vs defensive stocks", it is possible to say that cyclical stocks are riskier.
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Defensive Stocks
The type of stocks that can maintain their resistance and durability even during financial crisis periods that are frequently experienced in the modern world are called "defensive stocks". This type of stocks is usually listed in the markets by companies working in sectors such as food and health.
Because these types of products usually continue to be sold even during crisis periods. It is recommended that investors explore examples of defensive stocks for a balanced investment portfolio.
ESG Stocks (Environmental, Social, Governance)
In the ESG stocks type, where not only financial profitability but also environmental factors are taken into consideration, sustainability is the biggest motivation factor.
Tesla can be a good example in this regard because encouraging the use of renewable energy in the automotive sector promises to reduce dependence on non-renewable energy types such as oil. Within the scope of ESG stocks explained, we should remember that not only financial profitability but also environmental effects are important.
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How to Choose Which Types of Stocks to Invest in?
During the investment process, it is important to determine which of these different stock types are suitable for you. In this process, risk tolerance and financial planning should be determined realistically.
Those with fewer risk factors should be evaluated within the scope of "best types of stocks for beginners". These stock types are usually examples of dividend income. In addition to these, stock types listed in the blue-chip stocks list will also be safe options.
When answering the question "How to choose stocks to invest in?", an investor should create a diversified portfolio of different stock types, not a single stock type.
Which Stock Type is Best For Long-Term Investing?
For investors with a long-term perspective rather than a short-term return target, dividend paying stocks may be a good option. In addition, blue-chip stock examples may also be good in terms of reliability.
In addition, growth stocks that offer opportunities in terms of appreciation may also be a good choice. However, patience is an important requirement in long-term investment. Fortunately, you can keep your investment motivation fresh with periodic dividend income in many of these stock types.
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