If you want to make your future financially secured, then, in addition to your regular income you have to generate more money by investing in stocks.

What stocks are

Stocks are equity capital and are the smallest unit of shares in a company. As owner of stocks, you will also have rights to cast vote on the members of the board of directors and other similar important matters.

Types of stocks

Generally, there are 2 types of stocks, as mentioned below:

• Common stock: It represents the majority of stock held by the public. Being an owner of these types of stock, you will have the right to share in dividends, along with the voting rights. The stock market going ‘up’ or ‘down’ depends on the common stocks.

• Preferred stock: You will have fewer rights, if you own these types of stocks. However, if a company issues dividends, the preferred stocks will get first priority over common stocks.

Other than these two, depending upon the different objectives of various investors, some other types of stocks are:

• Income stocks: These types of stocks generate most of their returns in dividends, and each year, along with the growth of the company, the dividends also show continuous growth. The companies owning these stocks have high dividend payout ratio, and such companies are already large, they are also considered as blue-chip companies.

• Blue-chip stocks: These stocks belong to large companies having history of stable earnings and dividends. Due to the larger size, virtually there is little potential growth rate, so most of the returns of these stocks are in the form of dividends. However, if you bring these stocks in a bear market, you can earn capital gains from these.

• Growth stocks: These types of stocks belong to such companies who reinvest most of their income into business, in order to yield a higher return on stockholder’s equity. Thus, they give a higher return to stockholders, in the form of capital gains.

• Defensive stocks: These types of stocks are issued by companies that are resistant to economic cycles and may earn profit from them.

• Cyclical stocks: These stocks increase or decrease in their values along with the economic condition of a country. The companies holding these types of stocks mostly supply equipment for businesses or big items like, houses, cars, etc, for consumers. It would be best for you to buy these stocks when a business cycle is at its bottom and you can gain profit by selling the stocks when the business is at its peak.

• Speculative stocks: These stocks are issued by such companies that have little or no earnings. Their earnings vary widely but hold higher appreciation because they are tapping into a new market and could rapidly increase the stock price if the company is successful.

• Tech stocks: These stocks are issued by technology companies, which make communication devices, computer equipments, etc. The stocks of most tech companies are considered as growth or speculative stocks and some are also considered as blue-chip stocks.

The value of stocks are determined by the economic condition of a country. So, you should have a clear idea on the economic scenario and the types of stocks, before you invest your money on it.

FX systems – make your Forex trading automated and more effective.