When learning about the stock market you are going to find out there is a plethora of information to study. The good thing is that you do not need to figure it all out on the first day. However, in time you will need to educate yourself on all of the different terminology associated with the stock market. A good place for you to start would be the difference between all the different stocks themselves. In this article you will out the difference between common stocks and preferred stocks. You also find out the meaning of blue chip stocks, income stocks and growth stocks. Hopefully, by the end of the article you will feel a little more confident about your knowledge of the stock market and the next time you find yourself in a conversation about it you will know exactly what to say.
First of all, before you find out the meaning of all these different stocks, you should have a proper understanding of what a stock is. A stock is a share in a company. When you buy a stock in a company you are actually buying ownership into that company. If the company makes any net profit you may be entitled to a portion of it.
Now that you understand what a stock is you should know the difference between a preferred stock and a common stock. Preferred stock and common stock are the group that most stocks will fall into. A preferred stock will entitle you to a larger amount of the assets and earning if the company is liquidated. You would also be entitled to a fixed dividend. This would be paid out before the common stockholders receive their dividend. However, there are some downsides to owning preferred stock. In some cases you may not have any voting rights. You also will always receive the same dividend. That could be a good thing or a bad thing depending on the situation. With that said preferred stock is a little less of a risk, but not all companies offer this type of stock. Common stock is your regular stock. You may or may not receive a dividend, but you should have voting rights. While common stocks may do better than preferred stock as time goes by you should know that if the company goes bankrupt they will pay the preferred stockholders before the common stockholders.
Now you need to know the difference between blue chip stock, income stocks, and growth stocks. One thing they all have in common is that they are all common stock.
Blue chip stocks get their name from the game of poker. In poker the blue chips have the highest value most of the time. In the stock market world blue chip stocks are companies that have been around for a good amount of time with a history of high earnings. An income stock is one that pays high dividends and is less volatile than others. A growth stock is one that whose earnings and revenues are expected to grow quickly. Growth stocks may also be called glamour stocks.
This is just the tip of the iceberg when it comes to stock market terminology. Keep on reading and educating yourself on the stock market.
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