Z Cherry Blog

How Basic Stock Types Vary

February 26th, 2009

Many first time investors are confused by the different types of stocks, which has the effect of turning beginning stock market investors away from trading mutual funds or making investments they shouldn’t. So if someone is going to dabble in the stock market, he has to know the types of stock that are available and what each one means.

Anyone can purchase what is called common stock, which is basically part-ownership in the business from which you buy the stock. As the company earns money, the value of your stock rises and if the company does poorly, your stock falls.

There are also different classes of stock, which are often called Class A and Class B. The ability to have different classes of stock in a corporation didn’t exist until 1987. Class A gives the stock owner more votes per share than owners of class B stock get. Many investors avoid stocks with more than one class. These types of stocks are not called common stock.

Entry Filed under: Business