Stocks are nothing but just a part of the business portion you own in some of the shares,
There are 5 types of stocks available in the stock market.
- Blue chip
All the types of stocks are available in the market you just need to identify them at your own,
We will understand how can we decide which type of stock you are investing in and why you should invest in diversification,
Dividend stocks provide a stream of income in the form of dividends.
For example ITC
ITC Ltd., which was earlier known as Imperial Tobacco Company, started as a cigarette manufacturing company with brands like Goldflake, Flake, Classic under its banner. It has expanded into education and stationery products, hospitality, paperboards, and packaging, among others. The company was incorporated in 1910 and was renamed ITC Ltd. in 1974.
Its dividend yield is around: 5.19% and its payout ratio: 55.98%
Chandrudu made the bulk of his investments between 1967 and 1976. The demands of his job didn’t leave him with much time, so he only managed to track his investments, subscribe to rights issues, and collect dividends. When he retired two decades later, his portfolio had grown substantially. The 100 ITC shares he had bought in the 1974-75 IPO had grown to 8,820 shares by 2009. Other than the dividends and bonus shares that he has received over the years, Chandrudu got Rs 88,200 in 2010, when ITC declared a dividend of Rs 10 per share during its centenary celebrations.
Growth stocks are a high growth rate with increasing cashflow.
For example Reliance Industries
Reliance Industries has been the first to achieve the feat of a new milestone in market capitalization; the first to reach Rs 10 lakh crore, Rs 11 lakh crore, and Rs 12 lakh crore. RIL started as a textiles company in the 1950s and then diversified into multiple business channels. Currently, the company has oil and gas, refining and petrochemicals as its core businesses. Other businesses include retail, telecom, media, and many other subsidiaries.
Defensive stocks are low correlative to the overall stock market.
Stocks like Infosys technology (0.84), or NTPC (0.72) are considered defensive stocks.
Although these stocks create long term wealth at a lower risk, in a sustained bull run these stocks will underperform the market.
Blue-chip stocks are companies with excellent reputations and earnings.
Stocks that are issued by blue-chip companies, i.e. companies with a large market capitalisation are termed as blue-chip companies.
Companies who issue these shares are well-established and enjoy great market repute; therefore, the shares issued by them are highly valued in the market.
For example Tata consultancy services
Cyclical stocks are companies whose success follows the economic cycle.
Cyclical stocks are the type of equity stocks whose price is affected by macro-economic or systematic changes in the overall economy of the country.
For example automobile stocks
If the economy is booming, you have good savings. You would consider changing or buying a car or 2-wheeler.
So, the demand for vehicles will go up in a booming economy. Sales will increase. The profits will rise.
Hence, the stock prices will also move up.
Just like Tata motors Ltd
Hope this article helps and increase good knowledge for your investment journey,
Thanks for reading,
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