Stocks as we all know is one of the most attractive investment instrument that has ever been produced. From the ditches to riches, there are many stories of succesful stock investors. Well, there are also sad and heartbreaking stories too. With so much of an impact in the investment community, stocks are definitely an addictive investing instrument that needs to be dealt with caution and understanding. Before diving into investing in stocks, it becomes mandatory to know the different types of stocks. Many first time investors often get carried away by the riches who made a fortune with stocks but dont understand what stocks and its types are. Some get confused and move away from the stock market altogether, or simply make some other unwise investments. If you are going to risk your money in the stock market, you must know the different types of stock that are available and what it is all about!

Common Stock is a stock term that you will hear most often. Anyone can buy common stock, regardless of age, income, or financial standing. Common stock is nothing but part ownership in the business or the company you are investing in. As the company grows and makes money and eventually becomes profitable, the value of your stock rises. Profit and stablility being the key for any company, the stock gets the attention of large investment firms and the value of the stock gains a lot of momentum and the stock price soars.On the other hand, if the company does poorly or goes bankrupt, the value of your stock comes down like a free fall. Common stock holders do not participate in the day-to-day operations of a business, but they have the power to elect the board of directors.

Along with common stock, there are also different classes of stock. The different classes of stock in one company are often called Class A and Class B. The first class, class A, essentially gives the stock owner more votes per share of stock than the owners of class B stock. The ability to create different classes of stock in a corporation has existed since 1987. Many investors avoid stock that has more than one class, and stocks that have more than one class are not called common stock.

The most upscale type of stock is of course Preferred Stock. Preferred stock isn’t exactly a stock. It is a mix of a stock and a bond. The owner’s of preferred stock can lay claim to the assets of the company in case of bankruptcy, and preferred stock holders get the proceeds of the profits from a company before the common stock owners. If you think that you may prefer this preferred stock, be aware that the company typically has the right to buy the stock back from the stock owner and stop paying dividends.

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