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Types of Stocks

Stocks can be categorised based on a variety of factors, including the company's size, dividend payout, industry, risk, volatility, and fundamentals. Stocks classified according to ownership rules: This is the most basic criterion for categorising stocks. The issuing corporation chooses whether to issue common, preferred, or hybrid stock in this scenario. Preferred vs. common stocks: The main distinction between common and preferred stocks is the amount of dividend payments that are guaranteed. Preferred stocks guarantee that a set amount of money will be paid out in dividends each year. This is not a guarantee that comes with common stock. As a result, a preferred stock's price is less volatile than that of a common stock. Another significant distinction between ordinary and preferred stock is that preferred stock receives higher priority when the corporation distributes extra funds. If, on the other hand, the firm is being liquidated – that is, its assets are being sold off to pay off investors – preferred shareholders' claims are placed behind those of the company's creditors, bondholders, and debenture holders. Another distinction is that, unlike common stockholders, preferred stockholders may not have voting rights. Hybrid stocks are also issued by some firms. These are usually preferred shares with the option of being converted into a set number of common equities at a set time. Convertible preferred shares are the name for these types of equities. Due to the fact that these are hybrid stocks, they may or may not have voting rights in the same way as common stocks do. Embedded-derivative options stocks: Embedded derivatives are available on some equities. This indicates that it may be 'callable' or 'putable.' A 'callable' stock is one that the business has the option to buy back at a specified price or time. A 'putable' share allows the stockholder to sell it to the firm at a set price and time. These types of stocks are not commonly available.

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