Stock Market Part 2
It is also important to know about the classification of stock investments. A blue-chip stock is a safe investment that generally attracts conservative investors and can be found in big name companies that have a history of stable earnings and consistency. Income stocks pay higher dividends than average.
Gas, telephone, and utility companies are just a few examples of income stocks. Growth stocks are issued by companies who may have the possibility of earning dividends far beyond that of any other company in the economy, and includes characteristics of new technology, expanding retail, and new demand.
Cyclical stocks increase when the economy is doing well and decrease when the market is on a decline, and is privy mainly to automobiles and heavy manufacturing. During declines in the economy, defensive stocks remain stable. Blue-chip stocks, as discussed earlier, can also be classified as a defensive stock.
Stocks that sell for $1 or less per share are called penny stocks. Erratic earnings by a company or a new company will issue these types of stocks.
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