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The stock market is a great way to not only preserve your wealth, but help grow it in the future. There are many different classifications that stocks will fall under. Here is an easy overview that explains what the different types of stocks are.
Keep in mind these categories aren't official designations for stocks. They are just widely accepted terms. Often times a stock could fall into more than one of the categories.
Blue-chip Vs Penny
Blue-chip stocks - Think of the best of the best companies when you think of this category. Apple, Starbucks, Walmart, Disney, etc. These companies are market leaders, have a long track record of success, and would be completely shocking if they disappeared in the near future.
Penny stocks - Leo in The Wolf of Wall Street says pretty much all you need to know about Penny stocks. This is not financial advice, but you probably should not waste your money on Penny stocks...
They are called Penny stocks because these companies usually have their stock price around pennies per share since it is such a gamble to invest in them. They are highly speculative and should be viewed as more of a lottery ticket than a safe investment.
Large vs Mid vs Small Cap
Large-cap stocks - Stocks will get grouped by the size of the company, when doing this, you look at their total valuation, aka "market cap." A company with a market cap above $10 billion will be considered a Large-cap.
Mid-cap stocks - A company from about $1 to $10 billion will be a Mid-cap.
Small-cap stocks - A company at a $1 billion market cap or less will be considered a Small-cap.
Remember, since there's no official designation for these categories, some firms might view the categorization differently than the less than $1 billion, $1-10 billion, $10+ billion example used above.
Growth vs Value vs Dividend
Growth stocks - These tend to be newer companies with a lot of potential to grow their sales and userbase. However, they are less of a “sure thing” since they probably are not the market leader in their industry.
Value stocks - Think Warren Buffett, because this type of stock is his bread and butter. They are considered more on the conservative side. Usually it’s a company that is a well known brand and has been around for a long time. The price will most likely be more stable than a growth stock. A lot of times these will pay a dividend, which takes us to our next type of stock...
Dividend stocks - Some stocks will pay dividend payments to shareholders on a regular basis. This could be once a quarter, once a year, or on a more random schedule. Dividends are a nice bonus for investors since it gives a source of income based on how much you own. Growth or Value stocks can both also pay dividends, but it's probably more likely in Value stocks.
This is me after racking in about $2.42 last quarter in dividend payments from 2 shares of McDonald's stock my Aunt bought for me about 20 years ago:
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