There are so many different types of stocks available to trade on the financial markets that wading through them can make your head swim. You may find yourself wondering how other traders navigate this sea of companies, and the answer to that question is by dividing the companies up. There are a couple of different ways that companies can be grouped together, each providing a different perspective from which to assess them. We explain both in this article, so hold onto your masts, because we’re sailing in!
Common ways of categorizing companies
In order to make sense of the thousands upon thousands of publicly traded companies out there, it’s best to learn about the types of stocks you can invest in.
The major ones you should be aware of are:
- Small-cap stocks
- Mid-cap stocks
- Blue chip stocks
- US stocks
- International stocks
- Growth stocks
- Value stocks
- ESG stocks
- Safe haven stocks
Going over them in order, small- and mid-cap stocks refer to companies that are worth no more than $10 billion. These stocks have a future that is much less certain than that of blue chip stocks, which are companies that are leaders in their sector. A good example of a small-cap stock is aerospace company Virgin Galactic, while a popular mid-cap stock is the German airline Lufthansa.
The next categories that stocks usually fall into are US stocks and international stocks. The US stock market is considered the most transparent, as it imposes the strictest laws regarding investment, which is why most of the world’s free money is funneled into this market. This is also why the S&P 500 sees generally consistent growth year after year. Apple, McDonald’s and Amazon are all US stocks that see consistent, stable growth in price, while solid international stocks are BMW, Alibaba and Rio Tinto.
Growth and value stocks are categorized by what we expect from them. If a company is investing in itself and plans on expanding over the next five years, this could be considered a growth stock. Having sold off part of its Porsche holdings in an IPO to enter the electric vehicles market, Volkswagen is a good example of a growth stock. A value stock is a company that is trading at a severe discount or is considered to be trading at a bargain price. Both of these categories of stocks are viable investment options during different periods of economic activity. The current economic environment is full of undervalued stocks such as Netflix that will grow in price after the economy shifts back into growth.
ESG stands for Environmental Social Governance — a modern practice of investing in socially conscious companies that do not harm people, animals or the environment. Sometimes, these companies are good investment opportunities, other times they are not. Investors need to make up their own mind on where they stand on these sensitive topics and have clear investment goals to pursue. We recommend checking out Oracle and Adobe for companies that fall under this category.
Finally, safe haven stocks are stocks that do well even during an economic downturn. In periods of rising interest rates, the stock market takes a turn to the downside. This is a natural response to a strengthening currency and high inflation, but the prices of safe haven stocks remain stable. Some safe haven stocks include Coca-Cola, McDonald’s and Johnson & Johnson. Even when the economy is in a decline, people still continue to use these companies’ products.
Sectors: A top-down view of markets
In the capital markets, publicly traded companies offer products and services for different aspects of life. Analysts like to categorize these companies by what they do or offer. The main categories of stocks available on FiduCenter are:
🤳 Communication
Cellphones, internet, media and entertainment companies.
👨🍳️ Consumer discretionary
Retail stores, automakers, hotels and restaurants.
☕️ Consumer staples
Food, beverage and personal care products. Generally considered a safe-haven category, but not all companies in this sector are necessarily safe-haven stocks.
🛢️ Energy
The industry for energy production, including oil and gas and renewables.
🏦 Financial
All the banks and financial institutions are in this sector.
💊 Healthcare
Pharmaceutical and biotech companies, this sector experienced a surge during the coronavirus pandemic.
💻 Technology
Software, hardware and IT service companies.
During different parts of the economic cycle, these sectors grow at different speeds. In the current economic situation, the energy sector is experiencing some growth but also changing, with the balance of power shifting away from Russia.
Technology and consumer discretionary sectors grow the best during an economic uptick. You can find more information on which sectors are growing and which types of stocks to add to your portfolio by visiting our YouTube channel, which has playlists designed for providing investment ideas and trading strategies.
Picking stocks on FiduCenter
You can invest in and trade on different types of stocks through FiduCenter in three modes: FTT, Forex and Stocks. Each mode serves a different purpose in stock trading:
FTT
You can make outsized gains in a short amount of time using fixed time trades, trading both up and down.
Forex
You can use a multiplier to increase your position size, trading both up and down.
Stocks
You can diversify and hedge your portfolio using fractional units. You can also buy blue chip stocks in little amounts, allowing you to invest even if you have a small account.
You can find the full list of available stocks by clicking each mode and opening up the stocks tab. Keep in mind that stocks are trading on markets all around the world. The times that a stock is available to be traded depends on the time zone that the listing stock market is located in. You can check this information by clicking on a stock and then clicking on the information icon.
Building your portfolio
Knowing the two key methods of categorizing types of stocks will help you not only choose stocks according to your preferred trading style but also diversify your portfolio. We recommend learning about some indicators and testing them out on a free demo account in FTT and Forex modes. This will open up the lucrative world of trading to you without risk. Learn, trade and grow on a platform designed to help you succeed!