There are various types of companies that you can buy stock from. Buying stock is one way to become an owner in a company. Whether you are looking to buy a tactical position in a large business or a small-cap stock, the options are plentiful. Here, we will discuss what types of stocks you can buy and when each type might be right for you.
Ease of Access
One of the biggest differences between types of stocks you can buy is their ease of access. The most basic stocks you can buy are large blue-chip stocks, such as Amazon, Alphabet (Google) and Apple. These companies have large public valuations and are traded on the major exchanges making them easy to access and purchase. You can even purchase these stocks directly from the broker with a few clicks on your mobile phone without having to worry about complex trades or commissions.
The kinds of stock you can buy also vary in terms of risk. Blue-chip stocks are some of the safest investments you can make. They usually pay dividends, have a well-diversified customer base, and the company’s financials are publicly disclosed so you can see exactly how the company is doing. On the other hand, you can also invest in penny stocks, which are stocks of smaller companies that trade for pennies a share. These companies are generally much riskier, but also offer higher potential returns.
Small companies are usually not listed on the major exchanges and, as such, often have laxer reporting requirements. This sometimes makes small-cap stocks much riskier than blue-chip stocks; however, if you have an understanding of the company, the additional risk could pay dividends with higher returns. Smaller companies are more likely to have more volatile stock prices, which can be both a good and bad thing.
Technology companies are very popular stocks to buy. There is a wide variety of tech companies that you can buy stocks from. Some of the most popular stocks are Apple, Alphabet (Google), Microsoft, and Amazon. These companies offer cutting edge products and services and have a large user base. They all have relatively stable stock prices and offer long term appreciation potential.
ETFs and Mutual Funds
Exchange-traded funds (ETFs) and mutual funds are a great way to diversify your investments and spread your risk across multiple stocks and sectors. ETFs are a basket of stocks that are traded like a single stock. Mutual funds are a pool of money from investors that is managed by a professional fund manager to buy a variety of stocks, bonds, and other securities. Both are a great way to get exposure to multiple companies without investing a large amount of capital.
If you have the right connections, you might be able to get access to insider trading. Insider trading is when management or major shareholders of a company buy or sell their own shares in the company. This can be a great indicator of where the company is going and can give you an opportunity to get in on the ground floor of a potentially profitable company.
Buying stock is a great way to become an owner in a company. There are many different types of companies you can purchase stocks from, depending on your risk appetite and goals. Whether you are a conservative investor or a more aggressive one, there are many options available.