Types of Stock
Shares of stock give you an ownership stake in a corporation. Stocks provide better growth in equity and income than those provided by savings accounts or CDs. Stocks do carry risk of losing money. There are several types of stock and the relative risks and benefits of each are a major factor for investors trying to decide where to put their money.
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Common
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Common stocks give the owner voting rights and may pay dividends. Common stocks are best for growth-oriented investment strategies.
Preferred
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Preferred stock is lower risk than common stock because they must be paid first in the event the company fails. Dividends are larger and usually guaranteed, providing good income.
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Convertible
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Convertible shares are a type of preferred stock that can be changed to common stock, usually after a specified time.
Callable
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Callable preferred stock can be paid off (at or above the market price) by the issuing company under some conditions. Sometimes the company can force conversion to common stock.
Cumulative
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A cumulative preferred stock is one in which any dividends that are missed accumulate and must be paid when the company is able to do so and before any common stock dividends.
Participatory
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Participatory preferred shares earn a predetermined dividend but can earn additional dividends if the company's profits are good.
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