Types of stocks | what are the 4 types of stocks
In the stock market, there are various types of stock, which we discussed here one by one with examples.
Types of stocks in the Stock market:
1. Dividend Stocks
2. Growth Stocks
3. Defensive Stocks
4. Blue-chip Stocks
5. Cyclic Stocks
6. Penny Stocks
As per market Capitalization :
1. Small-Cap stocks
2.Mid Cap Stocks.
3. Large-Cap Stocks
1. Dividend Stocks :
What Are Dividends Stocks?
They Pay high and consistent dividends each year. But they do not promise very high growth as they are matured in their industry.
Also known as income stocks. They pay regular dividends.
How Do Dividend Works?
Every Company not paying Dividend. The Decision Of giving a Dividend is the choice of the company. Some Companies give Dividends As regularly but Some companies never give dividends to shareholders. That’s why you need to find such companies which have a good record of giving dividends on regular basis to the shareholders. So you can generate passive income by investing in those companies which give good dividends per share.
What is Dividend Yield?
It is the ratio of Total Dividend per share upon Stock Prize.
Suppose the company stock price is 200 and the company had given a 20 Rs Dividend in the year. That is 200/20 =10% dividend yield.
From My view, A company that has more than a 3% dividend yield, can be considered an investment purpose.
for Example dividend stocks in India Coal India, Ambuja Cement, Gail India limited Etc.
2. Growth Stocks :
What Are Growth Stocks
They do not pay high dividends as the company reinvests the earnings in its own business to grow further.
Due to growth in the company, its stock price increased rapidly. Grows rapidly in value and stock price.
Growth Stocks Are generate revenue and profits faster than the industry AVG.
In Growth Stocks, investors expect returns in the form of stocks price increases in the near future.
Growth stock examples in India as Tata Elxsi, Relaxo Footwear Etc.
3. Defensive Stocks :
These stocks are unaffected by economic conditions.
These Stocks have continual demand for their business or products regardless of the performance of the share market.
Why Invest in Defensive Stock?
Defensive stocks are playing a vital role in a portfolio. These stocks protect your portfolio when the economy is weak or the share market experience high volatility.
How to make money in the Bear market?
The answer is Defensive Stocks.
Regardless of how harsh the economic situation can be, people required food, shampoo, soap, and many other things we daily need.
Therefore companies whose products and services are in this category, are considered defensive and so their stocks are called defensive stocks.
These Companies provide you with dividends and perhaps an acceptable capital gain in times of economic difficulty when the stock market is experiencing long-term downtrends.
Examples are Food and beverages companies and consumer staples.
4. Blue-chip Stocks :
They have stable earnings and they also pay regular dividends. These are very large and well-recognized companies with a history of sound financial performance.
For Example blue-chip stocks India – Asian paints, TCS, Maruti Suzuki.
5. Cyclic Stocks :
These are Greatly affected by the economic conditions of a country.
They grow rapidly during the boom cycle but the growth is slowed down in the slow economy.
Not to be invested by new investors.
Examples of cyclical stocks – HEG, ESCORT.
6. Penny Stocks :
penny stocks meaning
Generally, a Price between 0.1 to RS.20 is considered a penny stock. These are highly risky, illiquid, and Lesser known to the public.
Considered a lottery. No analysis works here. Investors may win big or lose all.
Examples of Penny stocks in India– Vi, Suzlon, Yes bank.
According To market cap :
1. Small Caps :
These are small companies with a market cap of less than RS. 5000 crore. They are not known to a wider public and have the potential to grow faster.
Can become multi-bagger in a short span of time, if performed well
2.Mid Caps :
These are moderately larger companies than Small caps. The market cap is more than RS. 5000 crore but less than RS. 20000 crore Has the potential to become even bigger.
3. Large Caps :
These are well-established businesses and have a significant market share in their industry Market Cap of more than RS. 20000 crore is Considered as safe investments.
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