Different Type Of Stocks

What Types of Stock Is India?

Stocks are a publicly traded share of a company. Buying a stock allows you to invest in the company. Stocks can be classified in many different ways. These differences will help you decide which stock type is best suited for your investment goals. These are the most well-known types of stock in India: preferred stock vs common stock.

Preferred Stock vs Common Stock 

Common stock gives investors the opportunity to have a share of the company's revenues and also allows them to vote. This form is used for most stocks. Common stock holders get one vote for each share. This allows them to elect members of the board that will ultimately oversee the company's decisions. Common stock owners can also earn dividends. A dividend is a payment that is made every month to stock owners. Common stocks have a higher probability of receiving a dividend, but they are often unpredictable and unreliable.

Common stocks can provide higher returns over a longer period of time than other investments due to the company's capital growth. This return comes with a cost. Common stocks can also be very risky investments. Let's say you are a common stockholder in a company. When a company goes bankrupt or liquidates, creditors, preferred shareholders and bondholders get paid first before common shareholders get funds.

This is where preferred stock comes in. Prefer stock is similar to common stock. It allows an investor to retain a certain amount of ownership in a company. The voting rights of preferred shareholders are often different from common stock. They can be either limited or unlimited depending on the company. One other important difference is that preferred stocks have higher dividends, which are fixed and guaranteed for life. Common share prices are less volatile than preferred share prices. This makes them less likely lose or gain value.

In a sudden liquidation situation, preferred shareholders have priority over common shareholders in terms of payouts. The preferred stock is considered more valuable and can be called if necessary. This means that the company has the right to purchase preferred shares from any shareholder at any time. This can usually be done at a premium. These shares are considered lower risk by investors, so they can be classified between bonds and common shares. This makes them ideal for wealth creation rather than protecting income.

What Types of Stock Classes are There?

We can also classify stocks according to certain criteria. These are the most common classes used to distinguish stocks.

  • Company Size Classification: A company's market capitalization is a measure of its size, whether it is a large-cap or mid-cap company with the respective stocks. A stock that has a market capitalization exceeding Rs20,000 crores in India is considered a large-cap stock. Mid-cap stocks are those whose market capitalization falls between Rs20,000 crores and Rs5000 crores. Small cap stocks are those that have a market capitalization less than Rs5000 crores.
  • Section Wise Classification Stocks can be divided by the sector they are in. India has three sectors: the Agriculture and Allied Sector and the Industry Sector. Each sector contributes a different amount to the country's GDP. The Agri sector contributes around 17%, the Industry sector contributes 29.6% and the rest of 54.3%. There are many industries in each sector that have different stocks. The Services sector includes real estate, financial services and transport. It also includes public administration, trade communication, defense, hotels, and other related industries.
  • Classification based on location: Stocks can also be grouped based on where the company is situated, which is often done country-wise. Stocks in India are classified location-wise. This includes stocks from Indian companies as well as stocks from foreign companies. Because they diversify your portfolio, foreign stocks can be very useful. Stocks in emerging markets can be purchased in any country that has potential for growth.
  • Growth Potential Classification:Stocks can also be described as having value or growth potential. Growth stocks are offered by companies that are growing quickly or expect to grow rapidly. Investors may be willing to pay higher prices for growth stocks if they expect greater returns. Value stocks are often overlooked or underrated, and therefore underpriced. These stocks are either in a short-term decline or have not been discovered yet, so it is likely that they will soon increase in value.

The different stock types are generally popular and well-liked. Stocks can be divided according to company size, growth potential and location.

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