What is Stock? Definition, types, Categories & Examples|

What is Stock?

Stock which is also known as Share, is a type of security or equity that represents ownership in a corporation or company. If someone buys a stock, they are essentially buying a small piece of ownership in the company, and become a shareholder of it. Shareholders have the potential to earn a profit when the company performs well and its stock price increases. Conversely, if the company performs poorly, the stock price may decline, and the shareholder may experience a loss. Stocks are traded on stock exchanges, such as the New York Stock Exchange or NASDAQ in America & BSE, NSE in India, and their prices are influenced by a variety of factors, like company’s financial performance, market trends, and investor sentiment.

There are many different types of stocks in world, but some of the most common ones are:

1. Common Stocks: This is the most common type of stock, and it represents ownership in a company. Common stockholders have voting rights and may receive dividends.
2. Preferred Stocks: Preferred stockholders have a higher claim on a company’s assets and earnings than common stockholders. They are usually guaranteed a fixed dividend, which is paid before any dividends are paid to common stockholders.
3. Blue Chip Stocks: Blue chip stocks are stocks of large, well-established companies that have a long track record of stable earnings, strong financials, and a reputation for quality.
4. Growth Stocks: Growth stocks are stocks of companies that are expected to grow at a faster rate than the overall market. These companies usually reinvest their earnings back into the business, rather than paying dividends.
5. Value Stocks: Value stocks are stocks of companies that are considered undervalued by the market. These companies are often overlooked by investors, but they have solid fundamentals and may offer a good investment opportunity.
6. Penny Stocks: Penny stocks are stocks of companies with a low market capitalization, typically below $1 billion. They are considered risky investments, as they are often associated with small, unproven companies.
7. Cyclical Stocks: Cyclical stocks are stocks of companies that are highly sensitive to economic cycles. These companies may do well during economic expansions, but may struggle during recessions.
8. Defensive Stocks: Defensive stocks are stocks of companies that are less sensitive to economic cycles. These companies may provide stable returns during economic downturns, as they offer products or services that are always in demand, regardless of the economic climate.
9. Income Stocks: Income stocks are stocks of companies that pay a high dividend yield. These stocks are popular among investors who are looking for a steady stream of income.
10. Foreign Stocks: Foreign stocks are stocks of companies that are based outside of the investor’s home country. Investing in foreign stocks can provide diversification and exposure to different markets and economies.
11. Treasury stock: Treasury stock is also known as treasury shares, refers to the shares of a company’s own stock that it has repurchased from its shareholders and held in its own treasury. These shares are no longer considered outstanding, meaning they are not included in the calculation of dividends or voting rights.
12. Dividend Stocks: Dividend stocks are stocks that pay out a portion of their profits to their shareholders in the form of regular cash payments, called dividends. Companies that pay dividends typically do so on a quarterly basis, but some may pay monthly or annually. Dividend stocks are popular among investors who are looking for steady income streams from their investments. They are also seen as a way for companies to reward their shareholders for investing in the business and to demonstrate a certain level of financial stability and strength.

Stock Categories:

   Stock categories are the different ways in which stocks can be classified based on various characteristics. Common stock categories include market capitalization, sector, geography, dividend yield, growth vs. value, and index.

1. Market capitalization: This refers to the total value of a company’s outstanding shares of stock. Stocks can be categorized as large-cap (market cap over $10 billion), mid-cap (market cap between $2 billion and $10 billion), or small-cap (market cap between $300 million and $2 billion).
2. Sector: Stocks can be categorized based on the industry or sector they operate in, such as technology, healthcare, energy, or consumer goods.
3. Geography: Stocks can also be categorized based on the country or region they are based in, such as US stocks, European stocks, or emerging market stocks.
4. Dividend yield: This refers to the percentage of a stock’s price that is paid out as dividends. Stocks can be categorized as high-yield (dividend yield over 4%), medium-yield (dividend yield between 2% and 4%), or low-yield (dividend yield below 2%).
5. Growth vs value: Stocks can be categorized based on their growth potential or value. Growth stocks are expected to have high future earnings growth, while value stocks are considered undervalued by the market and have potential for future appreciation.
6. Index: Stocks can also be categorized based on the index they are included in, such as the S&P 500, NASDAQ, or Dow Jones Industrial Average.

Stock Examples (American & Indian Stocks):

1. Reliance Industries Limited (RIL): RIL is one of the largest conglomerates in India with interests in petrochemicals, refining, oil, gas exploration, and retail. The company’s stock is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). As of April 2023, RIL’s market capitalization is around INR 16.5 trillion.
2. Tata Consultancy Services Limited (TCS): TCS is an IT services company and one of the largest employers in the private sector in India. The company’s stock is listed on both the BSE and the NSE. As of April 2023, TCS’s market capitalization is around INR 16.8 trillion.
3. HDFC Bank Limited: HDFC Bank is one of the largest private sector banks in India with a wide range of financial products and services. The bank’s stock is listed on both the BSE and the NSE. As of April 2023, HDFC Bank’s market capitalization is around INR 10.7 trillion.
4. Infosys Limited: Infosys is a global IT services and consulting company headquartered in Bangalore, India. The company’s stock is listed on both the BSE and the NSE. As of April 2023, Infosys’s market capitalization is around INR 8.2 trillion.
5. Bharti Airtel Limited: Bharti Airtel is one of the largest telecom companies in India with a presence in over 18 countries across Asia and Africa. The company’s stock is listed on both the BSE and the NSE. As of April 2023, Bharti Airtel’s market capitalization is around INR 3.8 trillion.
6. Apple Inc. (AAPL): Apple Inc. is a technology company that designs and manufactures a range of consumer electronics, including smartphones, tablets, and computers. The company is headquartered in Cupertino, California, and has a market capitalization of over $2 trillion. AAPL is listed on the NASDAQ stock exchange and has been a popular choice among investors for its innovative products and strong financial performance.
7. Amazon.com, Inc. (AMZN): Amazon.com, Inc. is an e-commerce giant that offers a wide range of products and services, including online retail, cloud computing, and digital streaming. The company is headquartered in Seattle, Washington, and has a market capitalization of over $1.6 trillion. AMZN is listed on the NASDAQ stock exchange and has been a popular choice among investors for its dominant position in the e-commerce industry.
8. Tesla, Inc. (TSLA): Tesla, Inc. is an electric vehicle and clean energy company that designs and manufactures electric cars, solar panels, and energy storage systems. The company is headquartered in Palo Alto, California, and has a market capitalization of over $800 billion. TSLA is listed on the NASDAQ stock exchange and has been a popular choice among investors for its innovative products and strong growth potential.
9. Microsoft Corporation (MSFT): Microsoft Corporation is a technology company that develops and licenses software products, including the Windows operating system and the Office suite of productivity software. The company is headquartered in Redmond, Washington, and has a market capitalization of over $2 trillion. MSFT is listed on the NASDAQ stock exchange and has been a popular choice among investors for its strong financial performance and diversified product portfolio.
10. Facebook, Inc. (FB): Facebook, Inc. is a social networking company that operates the Facebook platform, as well as other social media and messaging apps such as Instagram and WhatsApp. The company is headquartered in Menlo Park, California, and has a market capitalization of over $1 trillion. FB is listed on the NASDAQ stock exchange and has been a popular choice among investors for its dominant position in the social media industry.