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| Common Stocks, Preferred Stocks and Penny Stocks |
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| Written by Harry Harbon |
| Sunday, 12 April 2009 08:10 |
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As you delve into the world of online stock trading, you should make sure you have a strong grasp on the basics. For example, everyone hears terms like stocks and stock trading all the time. But you would be surprised how many people don't actually understand stocks at all. With this article I'll get you started with a discussion of the different types of stocks. Common stock is the most common kind of stock, and that isn't a pun. Whether they realize it or not, when people discuss stock, they are most often deliberating common stock. Most issued stocks are this kind of stock. Through common stock, shares provide shared ownership and shared profits in dividends. If you're looking for the biggest long haul payout, common stocks are the way to go. But note that they're also the most risky of investments. Consider that when a corporation has to go bankrupt and must liquidate, preferred shareholders, bondholders and creditors are paid out long before common stockholders. The second main kind of stock is the preferred stock. This type of stock enjoys a greater ownership role in the corporation. This doesn't mean it has the same voting rights, but it usually does provide guaranteed fixed dividends. You should note that this comprises a major vantage over common shares as common shares features dividends that vary and therefore never are assured. In addition, whereas earlier we observed that common shares were paid off after many other parties, preferred shares are compensated earlier within the event of liquidation. And finally, preferred shares may sometimes be callable This implies the corporation might employ the capability to purchase preferred stock from preferred shareholders at a negotiated high price. People frequently refer to preferred stocks as debt not equity. It might help to see them as a mix of a bond and a common stock. So common stocks and preferred stocks are the two primary kinds of stocks. But did you know that these are further oriented with additional classes of stocks in many cases? These extra classes, which are created and defined by the corporation itself, allow corporations to better manage voting rights among its shareholders. So even among preferred stocks, you might have two separate classes of stocks, one which provides several votes per stock and another which provides only a single voter for every share of stock. So those are the major stock forms. There is another kind of stock though it actually is a capitalization-oriented sub-stock of these earlier types. That is the penny stock, or micro cap stock. While the terms are utilized interchangeably, micro cap stock usually refers to stocks categorized by market capitalization and penny stock simply refers to its valuation. While many online investors interchange the terms, a micro cap stock involves stock of a company with market capitalization between 250 and 50 million dollars and penny stock involves a stock traded for less than $5. A penny stock is also defined by one last distinction: you trade penny stocks on the Pink Sheets or OTCBB rather than on major security exchanges like the NYSE or NASDAQ. Regardless of which term you use or how you choose to label them, the market for penny stocks is more likely to be influenced and manipulated through fraud than stocks traded on the NYSE or NASDAQ. About the Author: Whether you are a savvy veteran of the stock market or a total neophyte, you should travel to the Trade Penny Stock guide to get a clearer grasp on the science and art of online stock trading. You may just need a tiny bit of additional data to find the best penny stocks or you may yet be studying where to find online stock brokers. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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