Types of Stocks

Introduction

Stocks come in different flavors suited to different goals. This lesson covers growth, value, and dividend stocks, plus the market-cap categories investors use to size companies.

Growth Stocks

Growth stocks are companies expected to expand faster than the market. They tend to reinvest profits into the business rather than pay dividends, aiming for strong price appreciation.

• High potential upside
• Often more volatile
• Little or no dividend

Value Stocks

Value stocks trade at prices considered cheap relative to their fundamentals (earnings, assets, cash flow). Investors buy them hoping the market will recognize their worth.

• Often mature companies
• Lower valuation ratios (P/E, P/B)
• May pay dividends

Dividend Stocks

Dividend stocks are companies that regularly distribute a portion of profits to shareholders.

• Provide steady income
• Often stable, established businesses
• Favored by income-focused investors

Market Capitalization Categories

Companies are sized by market cap (share price × shares outstanding):

• Large cap — big, established, generally more stable
• Mid cap — medium-sized, moderate growth
• Small cap — smaller, potentially faster growth but riskier

Which to Choose?

Your mix depends on goals and risk tolerance:

Young, aggressive      -> more growth/small cap
Steady income          -> more dividend/large cap
Balanced               -> a mix of all

Summary

• Growth stocks reinvest for appreciation; often no dividend
• Value stocks are cheap relative to fundamentals
• Dividend stocks provide regular income
• Large/mid/small cap size a company's risk and growth profile
• Choose a mix that fits your goals and risk tolerance

Next Lesson

Let's look at the income side: dividends and shareholder rights.