Different Types of Stocks

Posted on May 30, 2010
Filed Under Personal Finance | Leave a Comment

There are a couple different types of stocks in the market. Each type is a little unique. What different stock types are there in the market? Here are the 4 main categories.

1. Value Stocks

Value stocks are stocks that are fundamentally strong, but have been beaten down by the economy or by other investors. There is nothing wrong with these companies in fact they make excellent investments. However market participants have, for some reason, over looked them and as a result they are very cheap.

Investors can use things such as the PE ratio in order to fiind value stocks. What is PE ratio? This stands for the price to earnings ratio. It dividends the price of a stock by the amount that the company earned per share of stock. The PE ratio can then be compared with other companies to determine if the stock is undervalued or overvalued.

2. Growth Stocks

Growth stocks are different then value stocks because they are not from fundamentally strong companies. However these stocks do have the amazing potential to be great investments. For instance it may be in a new industry that has a huge potential reward, or it may be about to go overseas and get some more business.

In any case it is pretty much a bet that the company will take off and that their earnings will increase.

3. Dividend stocks

High dividend paying stocks are stocks that pay out a huge dividend above 5%. These stocks may not have the highest growth potential, but the large dividend makes up for it. They are built more as income investments then for growth.

4. Bad Investment Stocks

There are a lot of stocks that fit into this category. These are your penny stocks or the stocks that are extremely overpriced and look like they are turning around. Normally it is better to leave these kind of investments to those who are gambling in the market or to those who have some idea of what they are doing.

Those were the 4 basic types of investments. If you still have questions about the stock market you can ask them on this stock market questions page.

Related posts:

  1. Dont Fall Into This Trap When Investing Into Stocks
  2. Investing into Stocks
  3. Reasons to look at Dividend Stocks

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