What Are the Different Types of Stocks in the Stock Market?

  • January 10, 2019

Watch our video on how the different types of stocks in the stock market affect trading.

What Are 7 Different Types of Stocks to Invest In?

  1. Common stocks
  2. Preferred stocks
  3. ETF's (Exchange Traded Fund)
  4. Mutual funds
  5. ETN'S (Exchange Traded Notes)
  6. Blue Chip/Dividend Stocks
  7. Penny Stocks

There are many different types of stocks in the stock market. As a result, there are different methods and strategies for investing and trading the different varieties of stocks. The video above goes into the different types of stocks and the positives and negatives of each trading strategy. Make sure to download our free candlesticks e-book if you haven't already. 

Different trading strategies have many benefits to growing your trading and/or investing account. That allows you to take advantage of different types. Trader goals are to make money, in whatever method works. One method is not necessarily better over another, if they both make money, they are good. You just have to find the strategy that works for YOU! Different types of stocks has the advantage of finding profit. 

There are two common types of stocks. In fact, common stocks and preferred stocks are the two categories. However, you can break down those two categories into a more in-depth sector list

Common stocks get their name because they're common. Common stocks make up the majority of the stock market. In fact, they're the stocks most people talk about and trade. 

The common stock usually provides a dividend and if you're a long term investor, you have voting rights. In theory, owning a share gives you a vote. However, most people don't exercise their voting rights. $GOOGL is a great example of a stock with both common and preferred stock. 

1. Common Stock & Preferred Stock

Common stocks are seen as riskier than preferred stocks. For example, if you own shares in Amazon and they went bankrupt tomorrow and had to shut down, you'd lose your investment. You wouldn't see any money until creditors, preferred shareholders and bond owners are first paid. Now its not very likely a company like $AMZN goes bankrupt, but you get the idea. 

Preferred stocks are the flip side of the coin. These stocks are kind of like bonds and have no voting rights. Therefore, you get fixed dividends and get paid first if the company you've invested in goes belly up because you're a preferred shareholder. These are seen as safer investments.

However, we can break down different types of stocks in the stock market even further and go more in-depth. We teach how to do this live in our trading service. If you need more stock training then make sure to take our online courses.

Trading courses paired with the different types of stocks in the stock market are a recipe for success. Therefore, trading success is in your grasp.

Different Types of Stocks

2. Exchange Traded Fund (ETF)

ETFs are one of the different types of stocks you can trade or invest in. Exchange traded funds or ETFs track bonds, commodities, indexes and assets.

ETFs while a lot like mutual funds but are, in fact, different. They trade on the stock exchanges like common stocks. ​Therefore, as they're bought and sold, prices move up and down.

The larger ETFs have high trading volume and lower fees than mutual funds. This means the individual trader typically find these more attractive to trade.

ETFs also have options. This opens up their trading strategies a lot and you can hedge your bets and trade on speculation. Take our options course to learn more about hedging and speculation. Or our basic stock trading course if you're just getting started.

Since ETFs trade through exchanges, they're more tax efficient than mutual funds. The ​shares aren't redeemed each time you buy and sell them. Hence the tax efficiency.

You have the ability to save money trading ETF options. One contract controls 100 shares. Therefore, you're saving money. Hence their popularity. Make sure to take our free options trading courses if you need more help trading them.

3. Different Types of Mutual Funds & Stocks

Mutual funds are another one of the different types of stocks in the stock market that you can invest in. Mutual funds pool money together from many different investors and then invest that money into stocks and bonds.

In fact, mutual funds are run by investment companies. Therefore, all the researching and buying is done for you by a mutual fund manager. These are usually apart of investment portfolios.

You can buy shares in a mutual fund which means you get a part of any income they bring in. These are are so popular because of diversification. You're investing in different types of stocks instead of putting all your eggs in one basket.

Mutual funds are also quite affordable. In fact, the initial investment is typically set low. As a result, any purchases aren't expensive.​

Mutual funds are a great way to build an investment account. They're inexpensive as well as diverse. Check out our stocks lists page to get a breakdown of the most popular sectors.

4. Exchange Traded Notes (ETN)

Exchange traded notes or ETN are, per Investopedia, are a type of unsecured, unsubordinated debt security first issued by Barclays Bank PLC based on the performance of a market index minus applicable fees, with no period coupon payments distributed and no principal protections.

In essence, they're like ETFs because they trade on major stock exchanges. In fact, ETFs tend to be volatile. Therefore, use an ETF to gauge market direction. TVIX and VIX are just a couple different types of stocks ETNs.

If you participate in our trading rooms, you'll see ETNs like TVIX and VIX being used as part of technical analysis. As a result, not only can you trade them, you can use them to help determine market direction.

Market direction is important to trading the stock market. Therefore, ETNs are important. Who doesn't want to determine market direction? As the market goes, so go stocks.

5. Blue Chip Stocks: Different Types of Stocks

Blue chip stocks have different types of stocks within the sector. Companies that make up the blue chip sector are well established.

As a result, they're great for long term investments because they're seen as high value. Blue chip stocks are companies like Apple, Google, Intel, Netflix and Bank of America to name a few.

In times of economic downturn, ​blue chip stocks are seen has a safe haven. They've withstood the test of time. Blue chip stocks usually recover after a bear market so traders and investors don't worry about them. 

Blue chips are also pretty popular because of the dividends they pay out. It's another way to generate income for yourself. Dividends make up for price not moving up a lot.

You want the strong consistent growth blue chip stocks provide. You can invest and swing trade them to help grow you accounts.

Blue chip stocks are different types of stocks that include options trading. As a result, you're able to trade the large cap stocks for less money.

However, options don't get the dividend payout. Therefore, you must own the stocks to receive the dividend. Check out our stock market basics page to learn more.

different types of stocks

6. Penny Stocks

They are a popular sector when people are looking for different types of stocks in the stock market. Penny stock trading includes any stock that's $5 and under.

As a result, cheap shares attract traders. Especially those with the need to grow a small account. ​Penny stocks are highly manipulated which is important to be aware of. That doesn't mean you can't trade them however.

You need to practice proper risk management in penny stock trading and do a lot of research before buying. Someone may say penny stocks aren't a good bet to make. However, that doesn't mean that person is correct.

Hence the need to do your own due diligence. There are a lot of penny stock success stories.​ These stocks are being pumped through success stories. Who doesn't want to have the same thing happen?

If it sounds too good to be true, it usually is. That's the rub with penny stocks. However, do your own research. ​Research any penny stock and tip.

Don't be afraid of the penny stock sector. Especially when you look at the charts. Take the trade if a penny stock has a good setup. Our stock market training post helps you get started with penny stocks.

How Many Different Types of Stocks Should I Own?

  • The amount of different stocks that you should own depends on the size of your brokerage account, risk tolerance, and your ability to understand both fundamental and technical analysis. Some people like to buy and hold stocks long term and others are short term traders. The best thing to do is study and learn first before determining how many different stocks that your are going to own from the start. 

1. Charts Don't Lie

​There are different types of stocks. However, the charts are equally important in each type of stock. Therefore, it's an important skill to learn.

Charts give entries as well as exits. Candlesticks and patterns provide important support and resistance levels; along with moving average lines.

From penny stocks to ETFs, look at the charts. Long term investments with good entries provide better profits. Reading charts save you from the pump and dump.

Different types of stocks have one thing in common; charts. Therefore, we can't stress enough the importance of stock charts.

When someone says charts don't matter, run. The sure bet is the fact they're pumping. What does the chart tell you? Is there volume? 

Volume is important. Along with patterns and support and resistance. Price doesn't move without volume, and you can often confirm a good trade based on volume. 

Bottom Line on Different Types of Stocks

The different types of stocks in the stock market are available for every style of trader. Learning how to trade the different types can and will help you grow your trading account. You may find that not every type of stock is for you. As a result, you can focus on the types that are and grow your wealth. 

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