Clever Girl Finance

CHAPTER 5The Different Types of Stock Market Investments

Clever girls know … assessing your options is a foundational step for successful investing.

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When it comes to stock market investments, there are a variety of different investment types. In this chapter, we are going to cover the most popular types that commonly make up most portfolios. The reason why it's good to know what types of investments exist (and not just what they are but also how they work) is because this knowledge can help you make the best decisions for your own investment strategies based on your timeline, objectives, and comfort level. So, let's get into the most common investment types and how they work.

INVESTING IN STOCKS

Stocks, also known as shares, give you an ownership or equity stake in a company. When you buy a company's stock, you essentially become an owner or shareholder. The value of the stock you buy depends on several factors, including the company's size, what's happening in the stock market, the company's potential for short- and long-term growth, and more.

There are two types of stocks you can purchase: common and preferred stock. Both are issued by publicly traded companies (i.e. companies whose stock can be purchased on the stock exchange).

1. Common stock. This is also known as ordinary stock. This is the type of stock most people purchase for their investment portfolios. Holders of common stock (shareholders) have certain benefits, like voting privileges where they ...