When compared to other investments, stocks are one of the most popular instruments. The reason is simple, namely because stocks offer a more significant level of return. Even the capital to buy one lot of shares is quite affordable in the pockets of the community.

Before investing in stocks, learning the basics of playing stocks is very important to reduce losses that may occur in the process of buying and selling shares. In addition, an understanding of the types of stocks is also necessary so as not to buy the wrong thing.

Here are some types of stocks that investors should really know, so that the decision to buy a stock investment is right.

1. Stocks grow

Is a stock that is categorized as having the highest growth compared to other stocks in a sector. For example, shares of PT. Pan Brothers Tbk, which had the highest growth throughout May 2020. This share growth reached 65.20% among stocks in other textiles.

This growth was due to the high public demand for shares, which caused the price to rise significantly. Thus, stocks that are included in this growing category can provide maximum returns.

2. Blue chip stocks

One of the stocks that is no less attractive is blue chip, a stock that is believed to have a stable Return on Investment (ROI) value and profit. Blue chip stocks usually hold the highest share in the sector, making them stand out from the crowd.

In terms of fluctuations, blue chip stocks did not experience such sharp fluctuations. The growth is not too sharp, but it is sure to increase every year, which causes its share price to rise as well.

3. Stocks are cyclical

As the name "cycle", means that this stock has a growth system according to the cycle or time of each. If the cycle is good, the stock price will slowly increase. If not, then the share price will decrease accordingly.

Interestingly, the cyclical shares of these stocks are not affected by national or global economic conditions. Even during a recession, the value of the shares remains high if, for example, the issuer concerned is able to generate high income at that time.

4. Seasonal stocks

Seasonal stocks are stocks whose rise or fall is greatly influenced by the season, for example weather conditions and school holidays. When the holiday season arrives, stock prices in hotel companies increase because many are renting or building hotels or inns at that time.

When the season is over, it is likely that the price will slowly decline. The decrease may not be too significant, there will be an increase again while the demand for production of goods or services provided by the company remains.

5. Defensive stocks

And the last type of stock is defensive stocks, which have a growth rate with a stable amount of income outside of the influence of overall market conditions. This stability is created because of the constant demand for products or services from a company, so the price tends to be stable.

Like other stocks, defensive stocks will also experience a decline over time. It's just that, the price reduction is not too significant considering the demand that is always there all the time. If you want to get the maximum return on your investment, defensive stocks are not the right choice because their ROI is limited.

Those are the various types of stocks that you need to know before you dive into the world of buying and selling stocks. Whatever stocks you choose later, the point is to understand what their performance will look like so you can manage stocks independently. As a result, the results of investing in stocks bring maximum profits.

Source: Cermati.com