What are the different types of stocks

What types of stocks are there? An overview

Not all shares are the same. As a private investor, you should be aware of this fact in order not to be disappointed due to wrong ideas. If you want to invest your money in stocks, you should therefore find out beforehand which types of stocks there are and how they differ.

In principle, stocks can also be classified according to various criteria. For example, you can make a division according to the decomposition of the share capital. It is also possible that the shares are differentiated according to the type of transfer of ownership or the scope of shareholder rights.

Share types: Classification according to the breakdown of the share capital

When dividing the share capital into shares, a distinction is made between par value shares and no-par shares. Par value shares have a fixed par or nominal value and represent a proportion of the share capital. According to the Stock Corporation Act, this value must be at least € 1, but it can also be higher (only full euro amounts are possible).

In the case of shares, however, there is no nominal value. Instead, a certain proportion of the share capital of the issuing stock corporation is securitized. However, a nominal value can be fictitiously determined by dividing the total of the share capital by the number of shares issued. Companies must choose one of these types of stocks and cannot issue both types.

Subdivision by type of transfer of ownership

If one subdivides the types of shares according to the transfer of ownership, a distinction must be made between bearer shares and registered shares. In the case of bearer shares, benefits - such as dividend payments - are promised to the holder of the respective share. This happens regardless of who owns the share.

Registered shares, on the other hand, are issued in the name of the shareholder. The corporation keeps records of all shareholders. If the shares are sold, the new owner must first be entered in this shareholder register before he can exercise his shareholder rights. The so-called registered shares with restricted transferability are a special case. With them, the stock corporation must first agree to a sale of the shares. Many DAX companies now also issue registered shares. For example, Adidas recently switched to this type of stock so that the company can get more information about its shareholders.

Classification according to shareholder rights

When classifying according to shareholder rights, one subdivides into ordinary shares and preference shares, which differ in some special features. Ordinary shares are the most widespread type of shares in Germany (as well as in the USA or Great Britain) and the basic form of shares. The owner of a common share has all the rights and obligations provided for in the German Stock Corporation Act, but in particular has the right to vote at the general meeting.

In the case of preference shares, the shareholder often has to forego this voting right. In return, he receives preferential service for the dividend distribution. The holders of preference shares are served first, followed by the holders of ordinary shares. In addition, the dividend for preference shares is often higher.

Other types of stocks

These subdivisions are the most important for retail investors. However, there are other “rubrics”. For example, a distinction can be made according to the group of buyers - for example, employee shares that are issued to the workforce of an AG at special conditions. It is also possible to differentiate between new and old shares based on the time of the capital increase.

For private investors, however, the criteria explained are usually decisive. If you know your way around here and also pay attention to the tips for getting started in stock trading, nothing stands in the way of a successful investment. With an ordinary share, investors also have the important option of voting rights for the general meeting. Private investors are making a good choice with ordinary shares.

Two solid stocks for long-term investors While Procter & Gamble is already in numerous portfolios, Church & Dwight is still relatively unknown to many investors. > read more

© Verlag für die Deutsche Wirtschaft AG, all rights reserved