Stocks - 2

Classification of Stocks:

1. By size: Large Cap, Mid Cap and Small Cap.
Large Cap companies are relatively stable, but their growth potential is less than small caps.
Small Caps have demonstrated faster growth rates over the long period.

2. Growth / Value / Income:
Growth stocks have a healthy growth rate. Many times, risk is associated with higher growth rates.

Value stock: These kind of stocks are undervalued, meaning, they have a lower PE. However, they still have a very good potential for growth. For example, a good company may have had some problems recently (new CEO, change is public perception etc), and hence, the share price is dropped. However, the stock has a potential to be profitable in the long run.
Such stocks are called Value stocks.

Income stocks: these are the stocks that pay out a regular, steady dividends. These are attractive to the conservative investors.

3. Sector: There are 10 market sectors defined by S&P:

Technology
Energy
Health Care
Industrials
Financials
Telecommunications
Utilities
Consumer Staples
Materials
Consumer Discretionary

Historically, Healthcare, Tech and Finance have been considered as fast growing sectors. Utility sector is considered stable, with moderate growth potential.