Are all stocks the same? Name the types of stocks discussed in your assigned cha

Question

Are all stocks the same?

Name the types of stocks discussed in your assigned chapters and explain your answer in detail. Please share your personal experience with stocks as well.

Explain your answer in 200 words

Income stocks are issued by companies that pay large dividends, such as utility companies like Duke Energy, Exelon Corporation, and Exxon Mobil Corporation. Investors who are looking for reliable income from their investments and not appreciation (an increase) in the value of their shares often invest in income stocks.

Blue chip stocks are issued by companies that have a long history of consistent growth and stability. Blue chip companies pay regular dividends and maintain reasonably steady share prices. General Electric, IBM, The Walt Disney Company, and 3M are examples of companies that are considered blue chip stocks.

Growth stocks are stocks that are expected to generate revenues and earnings that increase at a faster rate than the average company’s does. These stocks pay little or no dividends. Instead, the firms that issue them retain their earnings and reinvest them in new projects that fuel the growth of the firms. Investors that buy growth stocks hope that their value will increase. Growth stocks tend to be riskier than other stocks because these companies often do not have proven track records. Tesla, Trulia, and Google can be considered growth stocks.

Value stocks are stocks that are viewed as being priced lower than what they should be based on the earnings and financial performance of the companies that issue them. The prices of these stocks have the potential to increase when the market adjusts for their incorrect valuation. Value stocks lie at the opposite end of the spectrum as growth stocks.

Cyclical stocks are issued by companies that produce goods or services that are affected by economic trends. The prices of these stocks tend to go down when the economy is in a recessionary period and go up when the economy is healthy. Examples of cyclical stocks include airlines, automobiles, home building, and travel.

Defensive stocks are the opposite of cyclical stocks. Defensive stocks are issued by companies that produce staples such as food, drugs, and insurance products and usually maintain their value regardless of the state of the economy.

Explanation / Answer

The income stocks and dividend stocks have one thing in common and that is both pay out dividend. Income stocks can be majorly those kinds of stocks which pay out regular dividends without much appreciation in the initial stock prices. They can also be called as more affordable stocks whereas there are second category to these stocks which are better than this. These are known as Blue Chip stocks. These are majorly established companies who grow your wealth while paying you the dividend as well. These stocks have higher PE ratios when compared to income stocks.

Growth stocks are the most volatile stock of all. The action of companies as well as that of its day to day press releases happens a lot on their share price movement. These stocks are high wealth creation stocks as may convert your wealth into double in a couple of fears. One wrong this about this stock is that they don’t pay dividend. The best example to these stocks can be of Apple and Amazon. Apple till date has never paid a penny as dividend and still is sitting on a cash pile of more than $200 Billion.

Value stocks are the ones which are available in the market for a discount because of some recent mishap with the company or its board. The reason for discount can be any. The current price of bank of America makes it a value stock for the investors. DXC Technology, Oasis Petroleum can be the current value stocks in the market,

Cyclical stocks are the ones which depend a lot on the economy. The value of correlation between the stock and the economy is upwards of 0.6.The ups and downs in the economy can be seen on the stock price of the company as well.

Defensive stocks are more like daily consumption stocks. No matter what is the state of the economy they have a steady income and thus a stead share price.

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