Types Of Stocks

Generally stocks are defined as owning a share in the company and representing a claim on the company's asset and earnings. There are two types of stock market namely common and preferred stock. 

Common Stock

As per the name indicates it is well common in comparison with Preferred stock. Common Stock carries voting right which has been practiced in corporate decision. If you have a common shares you can claim on a portion of profits. By owning a share you get one vote right per stock share and board member can be of your choice as you have rights to vote them. Regarding management board members oversees the major decision.

As far as Common Stocks are concerned, it has been revealed through study of investing and stock market that highest returns are possible when capital growth are at maximum. But Common Stock carries highest risk in the event of company's bankruptcy and liquidation. The share holder never get the amount unless tamount are paid to the creditors, bondholders and preferred stock holders.

Preferred Stock

Preferred Stock is legally entitled to receive a dividend payment to certain level. A fixed dividend is guaranteed forever. So in case of company's bankruptcy and liquidation preferred stock holder can be free of worries as they will be paid off. The stock holder has an option to convert Preferred Stock to a fixed number of common share at anytime even after a predetermined date. This type is known as convertible Preferred Share. Another option available for preferred share holder is that the company can get the shares from the share holder at anytime. As Preferred Stocks are callable the claim of share holder on the company's asset and earnings are greater. If the company's profits are higher then preferred stock holder get benefits.

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