There are many different types of stocks in the stock market. As a result, there are different methods and strategies for investing and trading different varieties of stocks. Different trading strategies benefit growing your trading and investing account. That allows you to take advantage of different types. Traders’ goals are to make money in whatever method works. One method is not necessarily better than another; they are good if they both make money. You have to find the strategy that works for YOU! Different types of stocks have the advantage of finding profit.
Table of Contents
- What Are Different Types of Stocks to Invest In?
- How Many Different Types of Stocks Should I Own?
What Are Different Types of Stocks to Invest In?
- Common stocks
- Preferred stocks
- ETFs (Exchange Traded Funds)
- Mutual funds
- ETN’S (Exchange Traded Notes)
- Blue Chip/Dividend Stocks
- Penny Stocks
There are two common types of stocks. Common stocks and preferred stocks are the two categories. However, you can break 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. They’re the stocks most people talk about and trade.
The common stock usually provides a dividend, and you have voting rights if you’re a long-term investor. 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 go bankrupt tomorrow and have to shut down, you’d lose your investment. You wouldn’t see any money until creditors, preferred shareholders, and bond owners are first paid. It’s not very likely that a company like $AMZN will go bankrupt, but you get the idea.
Preferred stocks are the flip side of the coin. These stocks are like bonds and have no voting rights. Therefore, you get fixed dividends and paid first if your invested company goes belly up because you’re a preferred shareholder. These are seen as safer investments.
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.
2. Exchange Traded Fund (ETF)
ETFs, while a lot like mutual funds, are, in fact, different. They trade on the stock exchanges like common stocks. Therefore, prices move up and down as they’re bought and sold.
The larger ETFs have high trading volume and lower fees than mutual funds. This means the individual trader typically finds these more attractive to trade.
ETFs also have options. This greatly opens up their trading strategies, and you can hedge your bets and trade on speculation.
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 can save money trading ETF options. One contract controls 100 shares. Therefore, you’re saving money. Hence their popularity.
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 from many different investors and then invest that money into stocks and bonds.
Investment companies run mutual funds. Therefore, all the research and buying is done for you by a mutual fund manager. These are usually a part of investment portfolios.
You can buy shares in a mutual fund, meaning you get a part of any income they bring in. These 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. 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.
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4. Exchange Traded Notes (ETN)
Exchange-traded notes or ETN are, per Investopedia, 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.
Essentially, they’re like ETFs because they trade on major stock exchanges. ETFs tend to be volatile. Therefore, use an ETF to gauge market direction. TVIX and VIX are just two different types of stock ETNs.
If you participate in our trading rooms, you’ll see ETNs like TVIX and VIX used in technical analysis. As a result, you can trade them and 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
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 as a 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 prices 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 your accounts.
Blue chip stocks are different types of stocks that include options trading. As a result, you can 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.
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 needing to grow a small account. Penny stocks are highly manipulated, which is important to be aware of. However, that doesn’t mean you can’t trade them. You must practice proper risk management in penny stock trading and 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, there is the need to do your 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 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.
How Many Different Types of Stocks Should I Own?
The amount of different stocks you should own depends on the size of your brokerage account, risk tolerance, and ability to understand both fundamental and technical analysis—some people like buying and holding stocks long-term, while others are short-term traders. The best thing to do is study and learn before determining how many different stocks you will own from the start.
Charts Don’t Lie
There are different types of stocks. However, the charts are equally important for 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, resistance levels, and 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 of support and resistance. Price doesn’t move without volume, and you can often confirm a good trade based on volume.
Final Thoughts: Different Types of Stocks
The different types of stocks in the stock market are available for every trader style. Learning to trade the different types 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.