What are the main types of stocks?

Corporations typically issue two different types of stocks: common and preferred. These represent the major classifications of stocks. Common stock is an investment security which represents ownership in a company. Holders of common stock are usually allowed to vote to elect a company’s board of directors and receive dividends paid out by the company. Preferred stock is an investment security which may, depending on the company, represent ownership and which is also a debt instrument of the company. Because preferred stock combines aspects of debt and investment securities, they can be seen as falling somewhere in between common stock and bonds. Preferred stockholders have greater security and are paid set dividends at regular intervals, but rarely have voting rights.

Stocks differ from bonds, which are a form of debt equity, and which have their own market and set of risks. A traditional corporate stock definition does not include bonds. Many companies offer all three types of securities: bonds, common stock, and preferred stock.