by Grace Glassier

Created on: May 21, 2007   Last Updated: December 18, 2008

Stocks in a corporation may be categorized by a variety of methods:

1. The size of the company large cap (or capitalization), medium cap, and small cap.

2. Where the company is licensed or headquartered foreign vs. domestic

3. The description of the goods or services that define the company's business i.e.; pharmaceutical, utilities, housing, industrials, etc.

4. What exchange the company's stock is traded on i.e.; the New York Stock Exchange (NYSE) or the NASDAQ among dozens of lesser others

5. The company's corporate governance i.e.; publicly traded shares vs. privately held.

6. The company's risk-reward profile i.e.; conservative growth vs. aggressive growth

BUT by definition, there are only two true "types" of stock. Stock is ownership of a corporation represented by shares. Shares may either be "common" or "preferred". The owners of common shares of stock are typically entitled to vote for the corporate board of directors and other important matters affecting the corporation's management. Shareholders may attend annual meetings of the firm's board or vote by "proxy". A "proxy" vote empowers another individual to represent the shareholder and is often done in writing.

Owners of preferred shares of stock usually do not have voting rights but will be paid dividends first before the owners of common stock. The preferred shareholders' dividends are fixed, and therefore are not dependent on the company's valuation or profitability. Unlike the common shareholder, the preferred shareholder will neither gain nor lose in the event of firm's transfer or sale. In the event of the company's bankruptcy or default the preferred stockholder's claims are paid first. On the other hand owners of common stock are the last claims paid in the event of the company's insolvency.

The dividends on a preferred stock do not expire and may be paid indefinitely in theory. The dividends paid on common shares of stock are decided by the board of the corporation and will likely rise and fall with the corporation's financial fortunes. Many different classes of stock may exist for each of the two different types of stocks. Stocks should only be purchased with the help of a professional unless you are familiar with, knowledgeable about, and skilled in the investment arena.

For more information on stocks and investing I recommend:

www.morningstar.com,

www.wallstreetjournal. com,

www.fool.com,

Warmest Regards

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