SHARETIPSINFO >> Articles Directory >>What You Should Know about Different Share Types while trading in Indian stock market
If you are seriously considering stock market investment and wish to gain from your investment then you need to have a strategy for investing in the stocks. For determining the investment strategy you should have a comprehensive understanding of different aspects of the stock market like types of the stocks and functioning of stock market. Here we are providing an overview of the type of stocks that you can invest in. Stocks are basically divided in different categories based on different factors.
Stocks of different classes – Stocks are divided in different classes and this is primarily done on the basis of the voting rights of the stocks holders. The right to vote at the annual meeting of the company to elect the board of directors and in other crucial issues for running the business comes with the ownership of the stocks. But depending on the class of the stock this voting rights differs to a great extent. Most of the stocks give the owner right to cast one vote. Some of the stocks let the owner to cast more than one vote and some of the stocks do not come with voting rights at all. Though these differences hardly have an effect on invest strategy this is important for the management and policy of the company.
Types of stocks based on market capitalization – There are so many companies that are listed in the stock market and they have different market capitals. The market capital of a company is the total lilangeni value of the outstanding shares of that company. The market capitalization is calculated by multiplying the current price of the stock with the number of outstanding shares in the market. On the basis of the market capitalization of the companies stocks of the respective companies are divided in different groups like small cap, mid cap and large cap stocks. The large cap stocks are shares of the highest value, small cap is shares of lowest value and the mid cap falls in between these two types.
Dividend stocks – These are stocks that give dividend to its shareholders depending on the profit of the company in a fiscal year. Though the companies are not liable to give dividends to its shareholders most companies give dividends to award the investors with financial gain. If you are investing in the stock market to get regular return from your investment, you should invest in these dividend stocks.
Growth Stocks – These stocks are just opposite the dividend stocks. The growth stocks will never earn you dividends as these companies prefer to reinvest the profit to the company to increase the growth of the business. Generally the newly formed companies and the companies that are looking for expansion offer growth stocks. If you are investing in the stock market to get huge return in a short period of time then the growth stocks are the right option for you.
Apart from these types of stocks three are several other types of stocks that are divided on the basis of different parameters and here we are presenting a few of them.
Sector Stocks – These are stocks that are divided on the basis of the business of the company. Depending on the sector or the industry of the company the stocks are divided and grouped together. Stocks of different sectors like the banking sector, financial sector, IT sector, FMCG sector and so on fall under this category.
Cyclical Stocks – These are stocks that typically follow the market trend. As the market evolves around the cyclical pattern of booming, falling, and correction these stocks also follow this pattern of rising and falling in terms of price.
Defensive Stocks – These stocks perform well even at the bad time of the market.
Tracking Stock – These are common stocks and tied to the subsidiary of a company. The dividend and capital gain of these stocks depend on the performance of the subsidiary company rather than the company itself.
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