Once you have decided that investing in the stock market is what you want to do, the next question is what stocks do you buy? Making this decision can be very confusing and doing your research before you begin will pay off significantly in the end. The first thing to be aware of are the different types of stocks that are available.

Common Stocks
If you decide to purchase common stocks, you are essentially buying a small piece of a company. While you will not be involved in the running of the company or have anything to do with the day to day operations, you will own shares in the company and will be given the ability to vote on company issues at shareholder meetings if you so desire. Stock holders can also vote to elect the board of directors of a company. Most common stocks will also offer some dividends based on the profits and performance of the company. If the company does well, your investment will increase in value and you’ll make more money. If the company goes belly up, you could lose everything.

Preferred Stocks
Preferred stocks are similar to common stocks but carry a little more power and security. Should the company you’ve invested in end up closing its doors, as a preferred stock holder you may be better able to recoup some of your losses. Unpaid dividends can accrue on preferred stock so that you are guaranteed to get that money no matter what happens to the company. The main difference between preferred stock and common stock is that with preferred stock you do not having voting rights and the dividend amounts are predetermined. You will make that amount and no more.
There are also different classes of stocks, generally referred to as Class A and Class B. A Class A stock will generally allow more votes per share than a Class B stock.

Growth Stocks
New or revamped companies that are in a stage of rapid growth or expansion will usually offer growth stocks. Because they are experiencing increased profits and balanced expenditures, stocks from these stable companies can be very enticing to investors who are looking for substantial returns on their investments. However, while growth stocks can be very rewarding, the rewards do not come without risk. Even though appearing profitable and secure, companies can still flounder and lose their way. If this happens, the investor stands to lose even more with growth stocks due to their larger initial cost.

Blue Chip Stocks
Blue chip stocks are the most expensive stocks to buy since they are from companies that are well established, long standing profit makers. Famous blue chip companies include such monsters as IBM and McDonalds. There is little risk involved in buying such stocks, and they are the perfect choice for investors who want to invest for the long term and see steady growth of their money.

As with all your investment decisions, you should educate yourself on the types of stocks available, understand your risk level and plan your spending accordingly.