Stocks are some of the most common financial assets in the world. In the past century, they have made many people billions of dollars; people like Warren Buffett, who have been investing in them, are worth billions of dollars!
This article will explain the types of stocks you can buy and how to select the best ones.
→ Six Fundamental Informations to Look at When you invest in Stocks Companies
Stocks Based on Industry
The first way to group stocks is to look at the industry; considering this, they are not grouped in a similar way. For example, technology companies like Google and Facebook are not the same as manufacturing companies like 3M and Boeing. Based on the industry, we can categorize stocks into:
- Technology: Like Google, Twilio, Salesforce, and Tesla.
- Consumer Goods: Coca-Cola, Pepsi, and Procter & Gamble. These companies are categorized into consumer staples and consumer discretionary.
- Retail: Similar to Walmart, Macy’s, and Target.
- Utilities: SCANA, PG&E, and NRG energy.
- Finance: These are banks, insurance, and other financial-related companies.
- Telecommunications: For example Verizon, Sprint, and AT&T
- Energy: Like ExxonMobil, Chevron, and Occidental.
- Healthcare: These deal with healthcare products like medicine. Examples are Johnson & Johnson and Gilead Sciences.
- Real estate: In this case the deal is with real estate development.
These companies are not valued the same way. For example, investors place a high-multiple on technology companies like Facebook because of he high-growth that comes with it.
Stocks Based on Stage
Companies are also categorized based on their stage. This group involves the following categories.
These are relatively new companies like Facebook, Amazon, and Tesla. These are young companies that are yet to become profitable. Investors invest in them with the hopes that they will one day turn profitable. As such, their multiples are usually very high.
Also, they are known to reinvest most of their funds and not give dividends to their investors.
The type of stocks that people like Warren Buffett advocate to buy. These are high-quality companies that have very low valuation metrics. For example, their price-to-earnings ratios are usually very low. Investing in companies like this is to hope that their stock price will rise again. Examples of these stocks are P&G, Unilever, and Boeing.
Kinds of stocks that have high dividend yields. Investing in companies like this is to hope that you will make money when they pay dividends. Examples of these companies are AT&T, Verizon, and Illinois Tool Works.
These are the ones that have seen their prices decline to below $5. These are known to be extremely volatile, so this means that they can make you or lose a lot of money.
Read also our guide to make money through penny stocks trading.
REITS are the Real Estate Investment Trusts. These are companies that invest in real estate and are mandated to return money to their investors every year or month. Examples of REITS include companies like Brookfield and KIMCO. They are known to have high yield.