Starting stock trading can seem like an intimidating endeavor, but once you “get the hang” of terminology and method of operation, everything will be easier. You shouldn’t get involved into this kind of trading unless you understand it completely. Following carefully some simple instructions will help you to become empowered with the necessary knowledge that will assist you in finding your way in stock trading business. One of the basic insights you’ll be needing is understanding different types of stocks. In the text bellow, you will find the explanations of basic stocks types.
Value stocks are an incarnation of a good catch for those investors seeking to profit from undervalued stocks. The companies which are selling them are underpriced when compared to other companies at the market. When in search for value stocks, investors may rely on investment services that monitor the indicators of value stocks, but in the end, they have to interpret those analyses on their own, and depend on their instincts, hoping to get the desired stock before the market corrects the price. This type of stocks is usually considered to carry low risk. Still, there is a risk, for their prices do not always return to their previous higher levels as expected.
With this type of stocks, everything is about potential. They are issued by companies whose earnings are anticipated to grow at an above-average rate. Because of that growth, investors consider these stocks very attractive as it is expected for their value to grow dramatically. The firms that issue growth stocks usually retain most of the earnings for reinvestment and because of that pay small dividends. These stocks are usually issued by companies in the field of technology of pharmacy. For instance, it is most likely that a pharmacy firm that is producing some cure for an actual disease will experience a growth in stocks.
These stocks are issued by relatively unknown companies on the market, with little or no financial background. Their appealing lies in the possibility to invest almost nothing (any stock with a share values under $5 is a penny stock) and then double your money. But before you get enraptured with the Wolf of Wall Street script, do your research in order to find out more details about the most important rules and risks. Though penny stocks universe is filled with failed companies, frauds, and sudden losses, it’s nevertheless attractive to investors because of the thrill with the possibility of getting rich rapidly.
Income stocks are known for their reliability, and it is why they are typically sought by conservative investors because of steady and predictable incomes that come of well-established firms with a consistent record of paying dividends. Income stocks can come from any industry, but are most commonly issued by companies operating within energy sectors, utilities, financial institutions and real estate and financial institutions.
These stocks are issued by companies with market capitalization of over $5 billion. Some of these market giants are worth more than the GDP of a smaller country. Large-cap stocks are characterized by stable income, less fluctuation, and most importantly, regular dividend payment. Companies that issue these stocks may be very profitable, but they don’t have many opportunities to grow. That’s why they are favorites for the investors who like to “play it safe”.