TYPES OF STOCK
Learn about three main types of stocks, as well as some potential advantages and considerations.
| Common Stock | Preferred Stock | American Depository Receipts(ADRs) | |
|---|---|---|---|
| A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets. As such, stockholders are partial owners of the company. Fractional shares of stock also represent ownership of a company but at a size smaller than a full share of common stock. | Preferred stocks (or preferred securities) are hybrid investments that share characteristics of both stocks and bonds. They can offer higher yields than many traditional fixed-income investments, but they come with different risks. | Many non-U.S. companies, that would otherwise be unavailable or inconvenient to trade, do trade in the U.S. markets as ADRs (receipts for shares of the foreign stock issued by U.S. banks). They are denominated in U.S. dollars and pay dividends in U.S. dollars. | |
| Potential for higher long-term return. Voting rights (does not apply to owners of fractional shares). Liquidity depends on trading volume. | Dividends are typically higher and fixed. Share price experiences less volatility compared to common stock. Preferred shareholders are more likely to recover at least part of their investment if the company goes bankrupt. | Local U.S.-based trading tends to be more liquid than local foreign markets. Investors may be able to access financial information more easily than if they invest directly overseas. | |
| Dividends, if available, are often lower, variable, and not guaranteed. Stock prices and dividends may experience more volatility than preferred stock. More likely to lose investment if the company goes bankrupt. | Lower long-term growth potential, if any. No voting rights in most cases. Generally less liquid than common stock. | Exposure to fluctuations in a foreign company's local currency could affect the value of the investment. Political or economic events in a foreign company's home country could potentially harm your investment. |
WHY TRADE STOCKS?
Stocks let you own a piece of a company’s future. They’re available for a wide variety of industries—so you can tap into your knowledge of specific businesses, or help you to diversify your portfolio.
Growth Potential
While stock performance changes over time, successful stocks can help your money grow—at times, they can even outrun inflation
Income
Some stocks pay regular dividends—that’s income you can keep or reinvest
Flexibility
Since stocks trade by the millions every day, you can move quickly when you’re buying or selling
Control
You decide which company to invest in, when it’s time to buy, and when it’s time to sell
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