Stock Types Edit

While the mechanics of trading in stock is pretty much the same regardless of their type, the dynamics of their market behavior will vary quite a bit. In many cases that difference is structural, and it is useful to know what those differences are.

Utilities Edit

These will typically be your phone, water and energy suppliers. What truly separates them from other publicly traded companies is that they are typically regulated, usually by state agencies. Because of that, their profits are often more the result of regulatory politics, than of market forces.

Typically, these stocks are bought for current income rather than for any hope of a capital gain.

Business Development CompaniesEdit

These invest in other companies. In a sense they are like mutual funds, but not quite, as they typically invest in companies that are not available via the stock market.

Financial Edit

Real Estate Investment Trusts Edit

Also known as REITs, these are a securitized form of real estate ownership, and are taxed differently from other companies traded on the exchanges. In the United States, at least, their dividends have the distinction of being taxed only once, rather than twice. That is because there is a statutory minimum percentage of yearly earnings that must be turned over to the shareholders in the form of dividends.

Partnerships Edit

Incredible as it may seem, there are partnerships that trade on the stock market. Usually trading in the form of unit trusts, they are also taxed differently from all other stock types. In the United States, dividend paying companies are typically required to send 1099s at the end of each year. Partnerships on the other hand, send out Schedule K-1 forms instead. Additionally, the distributions aren't considered to be dividends. Rather they represent a return of capital. As such, you are a lot more likely to be in need of professional tax assistance than might otherwise be the case.

Penny Stocks Edit

These are not for beginners. Given their inherent riskiness, most investors should probably avoid them. Still, if you are into gambling, they are probably safer than commodities.