Like every other market, stock market is a place where stocks are traded. For a long time now, stock market has been bringing businesses, investors, traders and other entities together. As an investor, among other things, you should know about the categorization of stocks to determine which stock type suits your investment goals. Here we are to let you know the classification of stocks on different parameters.
We know that stock is a type of security that represents the ownership of a fraction of a company. Stocks are classified into different categories based on the various parameters associated with the company and their performance in the stock market.
Types of stocks
Stocks are classified into different types on various parameters like ownership, market capitalization, risk, sectors, location among others. Below is a representation of types of stocks based on the respective parameters.
Let us look into each type of stock in detail
- Based on Ownership: 3 types based on the rights given to the stockholders
Common Stocks | Preferred Stocks | Hybrid Stocks |
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- Based on Market-cap: 3 types based on the market value of the total shareholding of the company
Large-cap | Mid-cap | Small-cap |
Large companies with market-cap of ₹20,000 crore or more are large-cap stocks. | Companies that have a market capitalization in the range of ₹5000 crore to ₹ 20000 crore are mid-cap stocks. | Companies that have a market capitalization in the range of up to ₹ 5000 crore are small-cap stocks. |
- Based on Dividend Payment: 2 types based on the dividend paid to shareholders
Income stocks | Growth Stocks |
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- Based on Risk: Broadly 2 types based on the risk profile of the stocks
Blue chip stocks | Beta stocks |
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Higher the beta, the higher the risk.
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- Based on Price Trends: Broadly 2 types based on economic changes effect on stock
Cyclical Stocks | Defensive Stocks |
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- Based on location: 2 types based on the location of the company usually done countrywise
Domestic stocks | Foreign Stocks |
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There are various other parameters like sectors, fundamentals, etc. based on which the stocks are classified. Classification of stocks on different parameters helps you determine the nature of stocks which in turn helps make a better decision. Now that you know the classification of stocks, you can choose the stocks that suit your investment needs. Also, you can refer to types of orders to know the various orders you can place to buy/sell stocks of your choice.