Understanding Stocks and Their Types in Depth: A Beginner's Guide

Why Do Companies Decide to Launch Stocks

Before discussing Stock and Shares in English, it’s important to understand why companies choose to issue shares to the public. Companies planning to expand and needing capital primarily consider going public through the stock market. This method allows companies to raise funds from a large number of investors simultaneously. The capital obtained can be used in various ways, such as paying off existing debts, developing new products, entering new markets, or creating additional facilities.

The Difference Between Stock and Shares: Clear Definitions

The term “Stock” in English is broader and typically refers to the ownership interest in one or multiple companies. In contrast, “Shares” is more specific, referring to units of ownership in a single company.

When a company decides to issue (Stock), it means the company is selling a portion of ownership to investors. Those who buy these shares are called (Shareholders). They have the right to receive a portion of the company’s profits in the form of dividends and also have voting rights in company decisions.

The “Share” in this context refers to a specific unit of ownership, which could be in a company, a mutual fund, or an ETF. Therefore, both Stock and Shares represent ownership rights, but Stock is a broader term.

Why Do Investors Decide to Buy Stocks

Investors have various reasons for purchasing company stocks. Investing in (Stock) is considered one of the popular long-term wealth-building strategies.

Capital Appreciation is the primary reason. When a company operates efficiently, its stock price tends to increase. Investors can buy low and sell high to realize profits.

Dividends are another attraction. Some companies regularly share earnings with shareholders. This additional income provides investors with a steady income stream.

Voting Rights are also advantageous. Shareholders have a say in the company’s decisions and can influence its direction.

How Many Types of Stocks Are There?

Stocks are generally divided into two main types: (Common Stock) and (Preferred Stock). Each type has distinct characteristics and rights.

###Common Stock(

Common stock represents basic ownership in a company. Common shareholders have voting rights and can receive dividends. However, dividend payments depend on the company’s performance and decisions. As a result, dividends may be high in one year and low or nonexistent in another.

)Preferred Stock###

Preferred stock grants special privileges to its holders, prioritizing them over common shareholders in dividend payments and asset distribution if the company liquidates. Preferred shareholders usually receive fixed dividends, providing more stability. However, they typically do not have voting rights.

Stocks Categorized by Growth Characteristics

When considering a company’s growth prospects, stocks are divided into two major categories with different features.

(Growth Stock)

Growth stocks are shares of companies expected to expand rapidly, exceeding the average market rate. Investors choose these stocks because they see potential for price increases. These companies are often in the technology sector or are expanding into new markets. Investing in growth stocks requires a longer holding period due to high volatility risks.

###Value Stock(

Value stocks come from well-established companies with stable income and profits. Their stock prices are often undervalued relative to their earnings. Investors favor these stocks because they offer consistent dividends and carry lower risks. They tend to be less volatile than growth stocks, making them suitable for risk-averse investors.

Both types carry risks and returns related to the company’s performance. The choice depends on individual investment goals and risk tolerance.