What are different types of stocks in which trading can be done?

A stock represents a portion of ownership in a company. By holding stocks of a company traders and investors become eligible to claim on its assets and earnings. To begin with trading, traders must have a Demat account as all the orders placed in the market of buying and selling of stocks will be done through this account. Investors have different objectives like growth, income, a secondary source of income and more. Depending upon their goals investors seek for stocks which are best suited to accomplish those trading goals.

On the basis of investment characteristics of stocks are categorized as follows:

• Common stocks

As the name says 'Common' these are the stocks which people are generally referring to when they are talking about stocks. They are capable of yielding high returns but do not guarantee any fixed return and therefore they are risky as well.By holding such stocks an investor gets other benefits like voting rights as well.

• Preferred stocks

A preferred stock guarantees investors fix return in the form of dividend but no voting rights are issued here. They are less risky as a fixed dividend is promised, less price volatility is seen here. In case a company gets bankrupt then preferred shareholders are paid off before common stockholder making it more popular among traders who are not willing to face many risks.

• Cyclical stocks

These stocks cycle with economic cycles i.e they grow strongly with the growth in economy and decline with the declining economy. Cyclical stocks are most affected by the economic trends and price of stocks fluctuates more when there is fluctuation in economic trend.

• Defensive stocks

These stocks are least affected by changes in economic conditions being highly resistant to such changes.Such stocks are preferred when economic conditions are not very good.On the other hand, cyclical stocks are preferred when the economy is booming.

• Speculative stocks

Companies that have less or no earnings but they tend to hold the good potential to have better earnings in near future as they are entering a new market or working under new management. Stocks belonging to such companies are known as speculative stocks. They are traded frequently by traders or gamblers in hope of making a good profit.

• Large, mid and small cap stocks

Stocks of companies which are large and holds good market capitalization are known as large cap stocks like a blue chip, defensive and cyclical stocks.Small cap companies hold the good potential for growth, therefore, stocks like speculative and growth comes under this.Mid caps stocks belongs to companies who are having medium market capitalization and are recognized as seasonal players in the market.

These are the different types of stocks in which trading can be done. On the basis of goals that are to be achieved investors can successfully decide in which stock he should invest. Along with this also a choice of brokers must be made carefully. As a huge sum of the amount which has to be paid as brokerage cost sometimes makes it difficult for traders to trade. Discount Brokers are the good choice as they charge less as compared to other traditional brokers and no unnecessary restrictions are imposed by them.