Within those broad categories of common and preferred, stocks are also divided in other ways. Here are some of the most common stocks available in stock market5:
Company size: You might’ve heard the words large-cap or mid-cap before; they refer to market capitalization, or the value of a company. Companies are generally divided into three buckets by size: Large cap (market value of $10 billion or more), mid-cap (market value between $2 billion and $10 billion) and small-cap (market value between $300 million and $2 billion).
Industry: Companies are also divided by industry, often called sector. Stocks in the same industry — for example, the technology or energy sectors — may move together in response to market or economic events. That’s why it’s important to diversify by investing in stocks across sectors.
Location: Stocks are frequently grouped by geographic location. You can diversify your investment portfolio by investing not only in companies that do business in the U.S., but also in companies based internationally and in emerging markets, which are areas that are poised for expansion.
Style: You might hear stocks described as growth or value. Growth stocks are from companies that are either growing quickly or poised to grow quickly. Investors are typically willing to pay more for these stocks, because they’re expecting bigger returns.