The basic two types of stock are common stock and preferred stock . Both types of stock have their pros and cons, so before buying a corporations stock, you must decide which one pleases you most. Common Stock Common stock is the basic stock a corporation issues. It just shows that you own a fraction of the company. The common stocks are directly influenced by failures and successes of the company.
Common stocks are more of a gamble.
Since there is a higher chance of making profit, common stock owners are issued their dividends or profits after the preferred stock. Prefered Stock After all the common stock has been issued, companies begin to distribute preferred stock . The preferred stock owners are given their dividends before the common stock owners are. Also, if the company goes out of business, and liquidates, the preferred stock owners are paid back the money they invested before the common stockholders are reimbursed. The main drawback of preferred stocks is that they cannot benefit as much from company profits because they are only paid a fixed dividend payment.