There are many kinds of investment vehicles. Common stock and preferred stock are equity securities. Each stock represents ownership in the company. Preferred stock is safer and more stable than common stock. If a company were to go bankrupt and there were assets to be distributed, the preferred shareholders would get paid before the common stockholders.
Debt securities are bonds, debentures, certificates of deposit and treasury bills.
These are loans to the company by the investor in return for interest payments. They are much safer than equity investments but offer very little opportunity to share in the growth of the company. These securities are outside our area of interest in this particular instance. Since we deal basically in common stock, let's examine the classifications of common stock. In another lecture we have talked about capitalization.