What is common stock?
Common stocks give you part ownership of a public company. Holders of this type of stock can vote on corporate issues, such as electing a board of directors and takeover bids, and are entitled to a share of company profts.
Where have you heard about common stocks?
When you purchase a company's stock you're nearly always buying the common stock. That's what most people are referring to when they talk about stocks and shares.
What you need to know about common stocks.
There are two main types of stock – common and preferred. Preferred stocks are a cross between common stocks and bonds. They don't come with voting rights, but offer more stability than common shares as they have a fixed dividend rate.
Common stockholders are at the back of the queue for payments. They only receive dividends after preferred stockholders have received theirs. And if a company goes bankrupt, they don't get their money until all creditors, bond holders and preferred shareholders have been paid.
On average, common stocks perform better than preferred stocks or bonds over time, but they are more volatile.