Grab the opportunities in the dip: 

Young investors have the benefit of time on their side. They can invest in the share market for a longer horizon. These youngsters can take the advantage of the prevailing market dip, buy quality stocks at low prices, and wait for them to grow when the market bounces back. It can set them up for long-term success even if they can afford to invest only a small amount of money initially. 

Invest consistently:

 Young investors may tend to lose focus once they make quick losses or gains in the stock market. However, they must remember their financial goals and invest consistently and smartly over a predetermined time span. Investing consistently will result in a balanced portfolio, which can withstand the market’s ups and downs. 

The benefit of time: 

While young investors may have a limited amount of money to invest initially, they have ample time to invest. With a longer duration of investment, young investors can open a demat account and benefit from the magic of compounding. They can reinvest their earnings from the stock market to multiply their gains manifolds. The longer an investor puts his money into an investment, the more wealth he can earn. 

Higher risk tolerance: 

The risk-taking capacity of an investor depends on his age. The lower the age, the higher your risk-taking ability. Young investors who are just starting their careers have more earning years ahead of them. Therefore, they can take a higher risk on their money and invest in volatile financial tools. Investors nearing their retirement age cannot experiment much with their money and prefer to invest their money in safer financial instruments, even if they give lower returns. A young investor does not need to compromise on his investments and can build a more aggressive portfolio. He can put his money into high-risk financial tools which offer better growth opportunities. 

Learn while investing: 

Young investors have the flexibility to try different investment strategies and experiment with their investment portfolio. They can study their success and failure in the stock market and modify their investment strategy accordingly. Investing has a lengthy learning curve, and investors of lesser age can invest the required time and effort to study market investments. These investors can afford to make mistakes in the stock market and recover from them. 

More tech-savvy: 

Younger people are more comfortable in using gadgets, applications, and tech-based platforms. They can easily study and understand the various online investing tools, and apply them to their investments. Technology can enhance a young investor’s knowledge, confidence, and experience. 

Increasing human capital: 

Young investors have several opportunities to learn advanced skills and increase their future earnings. They can invest more in the share market for better returns when they start earning better. 

Develop a habit of saving: 

People who start investing early automatically improve their habit of saving. They usually do not indulge in impulsive spending and understand the value of money. The financial commitment to investing in the stock market makes them disciplined and accountable for their expenses. 

Young investors can start early and make well-planned investments in the stock market. Investments such as dividend stocks are an additional income source for the entire life of the investment. A young investor can start investing as soon as he has a little money saved and increase his wealth over the years. 

Read also: What Are The Four Types Of Stocks in share Market?

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There are different types of stocks. You can open demat account along with a trading account online to trade these stocks. Let us explain these stocks and how these stocks are categorized. Here are the four primary classes of stocks. 

1. Stocks based on ownership

There are primarily two types of stocks under this category – common stock and preferred stock. 

• Common stocks offer voting rights to the shareholders to participate in corporate decisions of the management. Most companies have common stocks. 
• Preferred stocks offer the priority benefit of receiving dividends. The preferred stockholders receive a certain dividend payment before other shareholders, including common stockholders. There may or may not be voting rights for preferred stock shareholders. 

You can convert preferred stocks into common shares for capital appreciation if the company allows them. After a certain period, the company can recall preferred stocks. These are called hybrid shares.

2. Stocks based on market capitalization

Market capitalization is the total shareholding of a company. 

Large-Cap Stocks: These are known as Blue-chip stocks of well-established enterprises companies with large cash reserves. These stocks benefit investors with higher dividends. These companies’ market cap is over Rs.4,000 crores.

Mid Cap Stocks: These are the shares of the companies with a market cap of Rs. 250 – 4,000 Crores. These have a good track record of steady growth and the potential for further growth compared to large-cap companies. They offer stability to a seasoned player’s portfolio.

Small-Cap Stocks: These are the stocks of companies with a market cap of less than Rs.250. These companies possess a high potential for future growth. Long term investors looking for high growth in share value and who are not very particular about the present dividend cycles can consider these stocks.

Read also: Get Them Motivated: Tips for CFD Trading Leaders

Position on stock exchanges:

• Large Cap: 1st – 100th company on stock exchanges
• Mid Cap: 101 st – 250th company 
• Small-Cap: All companies beyond 250th

3. Stocks based on dividend payments

• Income stocks: These are also called dividend-yield stocks. These stocks distribute a higher dividend concerning their share price. These stable companies distribute consistent dividends but do not have high-growth potential. The stock price may not increase much. These are low-risk stocks. 

• Growth stocks: These companies grow faster, and the value of the shares also rises significantly. These are relatively riskier than income stocks. Investors can earn higher returns by selling them in the secondary market. Long term investing can be fruitful with these stocks.

4. Stocks based on fundamentals

Each stock has an intrinsic value. It is the true worth of the share. Investors can consider a company’s profits and earnings-per-share earnings ratio to estimate the intrinsic value per share. Investing in these stocks is known as value investing.

• Overvalued Shares: The price of these shares exceeds the intrinsic value.
• Undervalued Shares: The price of these shares is less than the intrinsic value. 

Further stocks can be classified based on risk factor and price trends also.

Equity investing is the way to gain inflation-beating returns and be fruitful with the proper fundamentals knowledge and experience. This classification will help investors to opt for the right type of stock as per their set financial goals. Two options for investors are active and passive investment approaches based on your risk appetite. Worth mentioning that indirect and long-term investments are less risky than direct stock investments and short-term trading. Open your demat account with a discount broker and save on investing costs.

Read also: Why is Senior Citizen Health Insurance a Bit Costlier In India?

The post What Are The Four Types Of Stocks in share Market? appeared first on Eurasian News.