Identify types of stocks as per financial goals

As an investor one gets confused while investing in stocks considering the huge number of companies listed.

Here are the details of different types of stocks which would help the investors to identify them as per their financial goals.

Growth stocks

These stocks are of the companies which are currently in the growth stage. They are looking at expanding their operations. These companies would be involved in new and upcoming fields. They are well-managed companies and the earnings and dividends are expected to grow faster than inflation and the overall economy. The company would be successful if it is able to create leadership and brand name, beat competition and have exceptional growth momentum through the various economic cycles. Since they require capital for growth, there is usually no, or very little, dividend income from growth stock.

Income stocks

These stocks belong to stable companies. They do not have large capital expenditure. They are in the mature stage. The profits are distributed to the shareholders in the form of a dividend. If you want dividend income and capital appreciation, you should look towards income stocks. Income stocks are sought by conservative investors wanting some exposure to corporate profit growth.

Value stocks

These stocks are currently at lower price than their fundamentals (i.e. dividends, earnings, sales, etc.). They are currently undervalued. These stocks have low P/E ratio and price to book value. The assets have more value than the current price.

Blue chip stocks

These are stocks of companies which are well-established companies and have stable earnings and no extensive liabilities. They can be income or growth stocks. They have a track record of paying regular dividends. They are relative safe and stability.

Source :ET