Exploring Different Types of Shares for Your Investment Portfolio

Shares or stocks, ETFs and crypto-currencies are different asset types which investors can purchase and sell via eccuity. Gold, silver, other commodities, term deposits, bonds, foreign currencies and real estate are also other asset types.

Shares

When most people think of stocks, they typically think of publicly listed shares or equities traded on the stock exchange. However, it's important for investors to know the different types of stocks available, understand their unique characteristics, and be able to determine when they may represent a suitable investment.

Common Stock

Sometimes referred to as ordinary shares - represents partial ownership in a company. This stock class entitles investors to generated profits, usually paid as dividends. Common stockholders elect a company's board of directors and vote on corporate policies. Holders of this stock class have rights to a company's assets in a liquidation event, but only after preferred stock shareholders and other debt holders have been paid. Company founders and employees typically receive common stock.

Preferred Stock

Preferred stock, or preference shares, entitles the holder to regular dividend payments before dividends are issued to common shareholders. As mentioned above, preferred shareholders also get repaid first if the company dissolves or enters bankruptcy. Preferred stock doesn't carry voting rights and suits investors seeking reliable passive income.

Growth Stocks

This refers to equities that are expected to grow at a faster rate compared to the broader market. Generally, growth stocks tend to outperform during times of economic expansion and when interest rates are low. For instance, technology stocks have significantly outperformed in recent years, fuelled by a robust economy and access to cheap funding. Investors can monitor growth stocks by following the themed exchange-traded fund (ETF), the SPDR Portfolio S&P 500 Growth ETF (SPYG).

Value Stocks

Trade at a discount to what a company's performance might otherwise indicate, typically having more attractive valuations than the broader market. Value stocks - such as financial, healthcare, and energy names - tend to outperform during periods of economic recovery, as they usually generate reliable income streams. Investors can track value stocks by adding the SPDR Portfolio S&P 500 Value ETF (SPYV) to their watch-list.

Income Stocks

Income stocks are equities that provide regular income by distributing a company's profits, or excess cash, through dividends that are higher than the market average. Typically, these stocks - think utilities- have lower volatility and less capital appreciation than growth stocks, making them suitable for risk-averse investors who seek a regular income stream. Investors can access income stocks through the Amplify High Income ETF (YYY).

Blue-chip Stocks

Well-established companies that have a large market capitalisation. They have a long successful track record of generating dependable earnings and leading within their industry or sector. Conservative investors may top-weight their portfolio with blue-chip stocks, particularly in periods of uncertainty. Several examples of blue-chip stocks include computing giant Microsoft Corporation (MSFT), fast-food leader McDonald's Corporation (MCD), and energy bellwether Exxon Mobil Corporation (XOM).

Cyclical Stocks

Directly affected by the economy's performance and typically follow economic cycles of expansion, peak, recession, and recovery. They usually display more volatility and outperform other stocks in times of economic strength when consumers have more discretionary income. Examples of cyclical stocks include iPhone maker Apple Inc. (AAPL) and sports gear giant Nike, Inc. (NKE).