Types Of Stock

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Blue Chips

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Stocks are often classified in terms of the differing objectives of investors or investment plans. These categories are somewhat fluid, but the vocabulary is widely used to describe stocks or groups of stocks.

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Growth

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Stock in firms that have shown the ability to grow at a faster pace than other, comaprable firms. Beacuse they are most concerned with growth, these companies often reinvest most or all of their yearly earnings, so dividends may be small or nonexistent. They are suitable for investors primarily seeking capital gain over the long term rather than income. Growth stocks tend to be more volatile, and heance riskier, than most stocks.

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Income

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Shares of companies in "mature" industiers that tend to pay a significant portion of thier income in dividends-utilities are a prime example. They are suited for those investors, mostly older, whose main interest is in current income rather than in capital gains.

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Defensive

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Stocks in compaines thatought to be gererally unaffected by the business cyecl ost that thier earnings continue even when the economy i sfaltering. An extere example would be stock in a firm knownto thrive on hard times- perhaps a chain of pawnbrokers.

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Cyclical

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These are holdings in companies whose returns mirror those of the economy as a whole: thriving when the economy is thriving, slowing when it falters. The automobile industry behaves this way at times. These stocks are of interest to investors who fell they cn divine an upcoming surge in the economy.

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Speclutive

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Stocks with poor or nonexistent current earnings but with the possibiliety or large capital gains. Examples would include a biotechnology firm with a new drug or a mining company reporting a big find. These are risky investments and are likely to be losing propositions if hte firm does not realize its potential.