Search
CloseOpen
categories of stocks
Back to blog categories

8 Categories of Stocks You Can Invest In

Before you get into stock picking, it’s essential to be aware of all of the options you have available; that is, the most common different types of stocks out there.

Though stocks often share multiple common characteristics, some are more or less emphasized. Therefore, it made sense to create categories of stocks, such that investors can select from a pool of stocks that are most likely to fit their needs and goals.

In this article, we will outline 8 stock categories so that you are more knowledgeable during your quest for outstanding stock market returns.

Income Stocks

Income stocks offer passive income in a regular and steady manner. These stocks usually offer dividends for an extended period without exposing your capital to a lot of risks.

At the same time, these stocks may not offer much capital appreciation, except in the sense that you reinvest the dividends you receive back in the stocks.

Income stocks often come in the form of high-yield common stocks or preferred shares (which offer a fixed dividend greater than what common shares offer).

Here are 3 income stocks that currently provide a high dividend yield:

  • AGNC Investment Corp.
  • Annaly Capital Management, Inc.
  • Owl Rock Capital Corporation

Penny Stocks

Penny stocks are usually trading for less than $5 per share. Though the definition isn’t that narrow across investors, stocks that are trading around that price (even a bit higher) can be characterized as penny stocks.

Another characteristic of penny stocks is that they are usually traded via over-the-counter transactions; that is, not through big exchanges like the New York Stock Exchange.

Another essential factor that contributes to the definition of penny stocks is that they are often issued by companies with very small capitalization.

Penny stocks are very “thinly” traded, meaning that there is very low liquidity in the market. For that reason, such stocks pose a very high risk for investors.

Here are 3 stocks that fit the definition of penny stocks:

  • Arcos Dorados Holdings Inc
  • Regis Corp
  • Invacare Corp

Speculative Stocks

Speculative stocks t are usually used by many traders as a means to speculate. Such stocks lack any sign of fundamental strength in their underlying businesses but still get a lot of attention from the market.

These stocks are inherently risky because they may be companies facing some major difficulties or are completely new ones (called IPOs).

Below we outlined some speculative stocks which fall into the “IPO” category:

  • Sono Motors
  • Jupiter Neurosciences, Inc.
  • Samsara Inc.

Growth Stocks

Growth stocks are expected to appreciate in value at a rate higher than the overall market.

Not paying any dividend and buying back the shares issued is a practice that is common for companies whose stocks are considered growth ones. For this reason, they are unfit for investors who want passive income, but ideal for those who want to grow their capital at an above-average rate.

Note that growth stocks do not guarantee exceptional returns. Rather they are called this way because this is what the market expects from them. The future may turn out differently, though.

Below, we outlined some growth stocks for you to take a look at:

  • University Bancorp
  • Louisiana-Pacific Corporation
  • Zimplats Holdings Limited

Cyclical Stocks

A cyclical stock is issued by a company that has a cyclical business.

Cyclical businesses are affected by macroeconomic changes, so they follow the cycles of the overall economy (expansion, peak, recession, and recovery). In the same way, the stock prices of such businesses rise and fall according to the cycle the economy is in.

The companies of cyclical stocks sell items/services that are in great demand during booming times but not so in a market downturn.

Here are 3 cyclical stocks that are good examples:

  • Disney
  • Expedia
  • EPR Properties

Value Stocks

Value stocks are those that are found to trade at a low price when compared to their fundamentals like profitability, creditworthiness, managerial ability, market prospects, etc.

Value stocks are often presented to be opposites to growth stocks. Moreover, these are considered to have bad underlying businesses. Indeed, most stocks that are found to be cheap are not expected to perform better than the market and may have a reason for trading so low.

But there are many instances where value stocks are profitable enough to indicate great performance in the future. Here are 3 value stocks that are like that:

  • Rio Tinto
  • Innoviva
  • Ternium

Defensive Stocks

Defensive stocks’ underlying businesses offer consistent and sustainable dividends and, at the same time, produce growing earnings regardless of the state of the stock market.

They also enjoy a constant demand for their products or services, so they are more resistant to the various cycles of the economy, which makes them opposite to the previously mentioned cycle stocks.

Here are 3 defensive stocks to consider if you are very risk-averse:

  • General Electric Co.
  • Intuit Inc
  • ASML Holding NV

Blue-Chip Stocks

Blue-chip stocks are the ones that are issued by very large and well-established companies with excellent reputations.

Other characteristics of companies with blue-chip stocks are great financial health and a long history of dependable earnings.

Here are 3 great examples of blue-chip stocks:

  • Chevron Corporation
  • Walmart
  • Facebook

Conclusion

Investing in stocks on your own is risky if you don’t know what you’re doing. You need to do your due diligence before you pick any stock.

But understanding what your options are when it comes to the stock market is the great first step. So, we hope we helped you take that before you continue in your investing journey.

Before you go, also keep in mind that choosing the right broker is essential to success. Every investor is different regarding their needs and goals.

Back to blog categories