Types Of Stocks:
In Sock Market, Aside from the private/public distinction, there are two types of stock that companies can issue: common stock and preferred stock.
Traders are preferred about stocks they are usually referring to common stock. In fact, the great preponderance of stock is issued is in this form. Common shares represent the preserve on profits (dividends).
Over the long term, common stock, by means of capital growth has tended to yield higher returns the corporate bonds. This higher return comes at a cost, however, since common stocks necessitate the most risk including the potential to lose the entire amount invested if a company goes out of business.
If a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, bondholders and preferred shareholders are paid.
Preferred stock functions similarly to bonds, and usually doesn't come with the voting rights-this may vary depending on the company, but in many cases preferred shareholders do not have any voting rights. With preferred shares, investors are usually guaranteed a fixed dividend in eternity. This is different from common stock which has variable dividends that are declared by the board of directors and never guaranteed.
In fact, many companies do not pay out dividends to common stock at all. One more advantage is that in the event of liquidation, preferred shareholders are paid off before the common shareholder.
Preferred stock may also be “callable,” meaning that the company has the option to re-purchase the shares from preferred shareholders at any time for any reason. An instinctive way to consider these kinds of shares is to see them as being somewhat in between bonds and common shares.