Short answer: The main types of stocks are grouped in two ways. By company size, stocks are large-cap, mid-cap or small-cap. By what the shares offer, they are common or preferred, income or growth, and value stocks. These categories overlap, so one company can belong to more than one of them.
Last reviewed: 12 November 2026
At a glance
| Category | What it means | Key point |
|---|---|---|
| Large-cap, mid-cap, small-cap | Grouping by company size | Small-cap stocks are generally high-volatility and high-risk |
| Common stock | Ownership, usually with voting rights | Dividends are variable and not guaranteed |
| Preferred stock | Fixed dividends and priority in asset distribution | Usually carries no voting rights |
| Income stock | Established company paying high, regular dividends | Dividends are the main feature |
| Growth stock | Company reinvests profits to expand | Usually pays little or no dividend |
| Value stock | Trades below intrinsic value (what the business is worth on its fundamentals) | Judged on earnings, cash flows and assets |
How does company size divide stocks?
Stock markets sort companies by size, and the three groups are large-cap, mid-cap and small-cap. The “cap” comes from market capitalisation, the total value the market places on all of a company’s shares. Size describes the company, not how its shares will behave.
Small-cap stocks are shares of smaller or emerging companies. They are generally high-volatility, meaning their prices can move sharply up and down, and high-risk. They often have poor liquidity, which means there may not be enough buyers and sellers to trade them quickly at a price close to the last one. Information is also scarce, so there are fewer public details to check before deciding anything.
What is the difference between common and preferred stock?
Common stock gives its holder ownership in the company, usually with voting rights on company matters. It also gives a residual claim, meaning the common shareholder gets what remains after creditors and preferred shareholders are paid, both from profits and from assets if the company is wound up. Dividends on common stock are variable and not guaranteed.
Preferred stock works differently. It generally pays fixed dividends and has priority over common stock when assets are distributed. The catch is that it usually carries no voting rights.
How would dividends differ in a worked example?
The figures below are hypothetical, invented only to illustrate the arithmetic. Suppose a holder owns 500 preferred shares of an imaginary company, which pays a fixed Rs 8 per share each year. The yearly dividend is 500 × Rs 8 = Rs 4,000, every year.
Now suppose the same holder owns 500 common shares of the same imaginary company. In year one the company pays Rs 6 per share, so the dividend is 500 × Rs 6 = Rs 3,000. In year two it pays nothing, so the dividend is Rs 0. The preferred amount is fixed, while the common amount depends on what the company decides to pay.
What are income stocks and growth stocks?
Income stocks come from established companies that pay high, regular dividends. A dividend is a share of profit paid out to shareholders. The appeal is the steady payment, but the dividend itself is not a guarantee of future payments.
Growth stocks belong to companies that reinvest profits to expand, such as building new capacity or entering new markets. They usually pay little or no dividend. The catch is that the return depends on the share price rising, which is uncertain. A company that reinvests everything gives shareholders nothing in cash while it does so.
What makes a stock a value stock?
A value stock trades below its intrinsic value, which is an estimate of what the business is worth based on fundamentals such as earnings (profit), cash flows (money coming in and going out) and assets. A stock priced at Rs 80 with an estimated intrinsic value of Rs 100 would be a value stock on this measure.
The catch is that intrinsic value is an estimate. It depends on forecasts of earnings and cash flows, and if those forecasts are wrong, a stock that looked cheap may not be. A low price relative to fundamentals is a reason to look closer, not proof of a bargain.
Frequently asked questions
Does company size tell me whether a stock is safe?
Size describes the company, not its safety. Small-cap stocks are generally high-volatility and high-risk, with poor liquidity and scarce information.
Can one stock belong to more than one type?
Yes. Size, ownership form, dividend pattern and valuation are different ways of describing the same company, so a single stock can fit several categories at once.
Do preferred shareholders get to vote?
Usually not. Preferred stock generally carries no voting rights, but it pays fixed dividends and has priority over common stock when assets are distributed.
Are dividends on common stock guaranteed?
No. Dividends on common stock are variable and not guaranteed, so the amount can change from year to year or be nil.
Sources and last check
Facts in this article were checked against the sources below on 12 November 2026. Rules and figures can change; check the primary source before acting.
- kotakneo.com (broker education)
- upstox.com (broker education)
- groww.in (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.