What Are The Different Types of Stocks? – Common, Preferred, Hybrid, etc

Stocks are shares you can buy in a company. In the Indian stock market, there are many types of stocks. Each type has unique features that suit different goals. Some stocks let you vote on company decisions, while others don’t. Some pay regular money (dividends), and others focus on growth. Stocks can be grouped by company size, risk, or how they act in the economy. This guide explains the types, what you want, and how much risk you can take.

Stocks Based on Voting Rights

Some stocks let you vote on company decisions, like choosing leaders. Others don’t. Here’s how they work:

No-vote stocks: You own the stock but can’t vote at company meetings.

Voting stocks: You can vote on company matters.

Multi-vote stocks: You get more than one vote for important decisions.

Stocks Based on Company Size

Stocks are grouped by company size. Company size is calculated by multiplying the stock price by the total number of shares, which is called market capitalisation.

Large Cap Stocks:

• These are from big, well-known companies with lots of money.
• They grow slowly but pay good dividends (extra cash to shareholders).
• Suitable for people who want safe, long-term investments.

Mid-Cap Stocks:

• These are from medium-sized companies (Mcap from ₹250 crore to ₹4,000 crore).
• They grow faster than big companies and are fairly stable.
• Suitable for people who want growth and some safety.

Small Cap Stocks:

• These are from small companies (Mcap up to ₹250 crore).
• They can grow a lot, but their prices change a lot.
• Suitable for people who can wait a long time and handle price ups and downs.

Stocks Based on Ownership

Stocks give different rights depending on who owns them.

Common Stocks:

• You can vote on company decisions.
• If the company makes extra money, you might get some.
• If the company shuts down, you get paid last.

Preferred Stocks:

• You get fixed dividends every year (like regular payments).
• Prices don’t change much, so they’re less risky.
• You can’t vote, and if the company shuts down, you get paid before common stockholders.

Hybrid Stocks:

• These are preferred stocks that can turn into common stocks later.
• Some may let you vote, some don’t.

Stocks with Special Options:

• Callable stocks: The company can buy them back at a set price.
• Putable stocks: You can sell them back to the company at a set price.
• These are rare.

Stocks Based on Dividends

Dividends are extra money companies pay to shareholders. Stocks are grouped by how the dividends they pay.

Growth Stocks:

• These don’t pay much dividend because the company uses the money to grow.
• The stock price can go up a lot if the company grows fast.
• Suitable for people who want big returns later, not quick money.

Income Stocks:

• These pay high dividends, so you get regular money.
• The company is stable but doesn’t grow much, so the stock price stays steady.
• Suitable for people who want extra income with low risk.
• Dividend Yield: This shows how much dividend you get compared to the stock price. For example, if a stock costs ₹100 and pays ₹5 dividend, the yield is 5%

Stocks Based on Value

Some people buy stocks based on whether they think the price is fair compared to the company’s real worth (called intrinsic value).

Overvalued Stocks:

• The stock price is higher than the company’s real worth.
• These might not be a good buy.

Undervalued Stocks:

• The stock price is lower than the company’s real worth.
• These are popular because the price might go up later.

Stocks Based on Risk

Stocks can be risky or safe depending on how much their prices change.

High-Risk Stocks (Beta Stocks):

• Beta measures how much a stock’s price moves compared to the market.
• If beta is more than 1, the stock is very risky (prices change a lot).
• High risk can mean high returns, but you could lose money too.

Low-Risk Stocks (Blue Chip Stocks):

• These are from big, stable companies that pay regular dividends.
• They don’t lose value easily, so they’re safer.
• Suitable for people who want low risk.

Stocks Based on Price Movement

Stocks behave differently when the economy changes.

Defensive Stocks:

• These stay stable even when the economy is bad.
• Example: Companies that sell food or drinks.
• Suitable for tough times.

Cyclical Stocks:

• These change a lot with the economy.
• They grow fast when the economy is good but slow down when it’s bad.

Conclusion

Stocks come in many types, each with its benefits and risks. Income or blue chip stocks might be best if you want steady money. Try growth or small-cap stocks if you wish to consider considerable growth and can handle risk. For safety during bad times, defensive stocks are a good choice. Think about your goals, how much risk you can take, and how long you can wait for returns before picking a stock. Always learn about the company before buying its stock to make wise choices.