Types of Stock

Last updated: April 13, 2016

*The information on this page is credited to IPT and Kiplinger. Their original materials are made available on the Kansas Securities Commissioner's website.

Growth Stocks

These include shares of companies with good prospects for growing earnings and value faster than their industry or the stock market in general. Although their share prices are expected to go up over the long term, they may involve moderate-to-high risk in the short run.

Blue-Chip Stocks

Although you won’t find an official blue-chip stock list, this category includes industry-leading companies (such as the 30 stocks that form the Dow Jones industrial average: a major performance measure of the U.S. stock market). These companies tend to be large well-established household names that have stable earnings, pay dividends and involve less risk than stocks of less-established companies.

Income Stocks

These companies pay out a larger portion of their profits in the form of quarterly dividends than other stocks. They tend to be mature, slower-growth companies. As long as the companies keep up their distributions, the dividends paid to investors make these shares less risky to own than many other stock categories. The price of an income stock is typically influenced by changes in interest rates.

Small-Cap Stocks

The name is derived from the company's relatively small market capitalization, generally between $30 million and $2 billion. Shares in stocks of small companies are riskier than blue-chip or income stocks. As a group, their long-term average returns have been high, but those long-term returns come at a price: short-term volatility.

Foreign Stocks

Adding a dash of international flavor to your retirement portfolio through foreign-stock mutual funds can increase its diversification and returns. This is because international markets tend to perform differently than the U.S. stock market. Foreign stocks are subdivided into developed markets, which are established and less risky, and emerging markets, which are faster-growing and more volatile.

Cyclical Stocks

The fortunes of these companies are sensitive to business cycles and tend to rise and fall with the economy: prospering when the economy is on the upswing and suffering in recessions. These companies include such industries as airlines, home builders, and chemical companies.

Defensive Stocks

Defensive stocks describe shares of companies whose sales of goods and services tend to hold up well even during difficult economic conditions. Examples of industries that are substantially insulated from the business cycle are utilities,government contractors,and producers of basic consumer products, such as tobacco, oil, food, beverages and pharmaceuticals.

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