As already discussed, when you buy stock, you are becoming an owner of the company. If the company does well, the value of your stock should go up over time. If the company does not do well, the value of your investment will decrease. Many companies distribute a portion of their profits to shareholders as dividends. As owners, shareholders generally have the right to vote on electing the board of directors and on certain other matters of particular significance to the company.
Companies issue two types of stock, common and preferred.
Common stock is the basic form of ownership in a company. People who hold common stock have a claim on the assets and earnings of a firm after the claims of preferred stockholders and bondholders. The safety of the principal of preferred stock is greater than that of common stock, however, preferred stockholders cannot vote for the directors of the company. Most utility stocks are considered income stocks 2. Blue chip stocks usually pay small but regular dividends and maintain a fairly steady price.