Types of Stocks
The common stock is as anyone would describe it, the most common when it comes to categorizing stocks. Most of the times you would hear someone talking about stocks, they are probably referring to the common stock. The common stock share basically is proof of ownership in a company and claim on a portion of the company’s profits. Stock holders also get one vote per every share they possess during various elections, most notably board member election, and thus have an impact on the management of a company through it.
It is though the most risky of stocks to invest money in since the if a company goes bankrupt or liquidates, the shareholders will not be receiving any money until the company has paid off its debts.
The preferred stock, unlike the common stock offers partial ownership in a company and most of the times doesn’t give voting rights to the shareholder. This of course differs from one company to another and the benefit of having a preferred stock is that you will actually have a fixed dividend forever. Preferred stocks can also be callable, depending on each company again, and can thus be bought back from the shareholders at any time for any particular reason. It is generally considered that preferred stocks are more of a debt than equity. They are something in the middle of bonds and common stocks.
Different Classes of Stock
Even though common and preferred are the two main categories that stocks are put into, many companies put their stocks into sub-categories as well. The reason for doing so is most of the times the fact that a company might want the voting power to be only for a certain amount of people. So, these sub-categories separate the stocks that give the shareholder voting power from the ones that don’t.