Types of Stock and Bonds Investment

Some people are choosing to invest in stocks and bonds as a way to secure their financial future. There are several things to consider before deciding where to invest your money. The most important thing to think about is which one would give you the highest return.

There are two types of stocks you can invest in, which are referred to as common stocks or preferred stocks.

• Common Stocks: This type of stock allows the shareholder to vote on important matters, which include the election of company officers. It may also provide the shareholders with a share of the dividends. This type of stock offers a greater potential for a higher return than preferred stocks, but the risk are a lot higher.


• Preferred Stocks: This type of stock would pay you a fixed dividend, but often does not offer voting rights. The dividend of this type of stock would not increase even if the company's profit were to increase. Preferred stock holders would recoup their investments before common stock holders if the company fails.

There are three common types of bonds:

• Municipal Bonds: These are issued by states, cities, towns and counties and pay for public works projects such as schools and highways. This type of bond is popular among people who are in a high tax bracket because they are exempt from federal taxes and in some states they are also exempt from state taxes.


• Corporate Bonds: These types of bonds are issued by private corporations to raise money for capital expenditures. Investing in this type of bond does carry risks. If the company's credit rating changes so does the value of the bond.


• U.S. Treasury Bonds: These types of bonds pays for various government operations and are considered to be relatively secure investments because the government ensures the investment is repaid.