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Types of Stocks Based on the Trading Performance

Shares are form of one's capital holding in a listed company. Stock investment has been trending in recent years because it provides greater profit opportunities than other investment instruments.

If the company performs well and makes a profit, shareholders will get the benefit of capital gains and dividends. On the other hand, shareholders will experience capital loss if the company's condition is unstable.

Therefore, when looking to invest, it is important to conduct fundamental as well as technical analysis to assess the stock's trading performance.

Types of stocks

Based on their trading performance, stocks are divided into several types.

1. Blue Chip Stocks

Blue chip stocks are the choice of many investors, especially beginner investors with a low risk profile. This is because these types of stocks are issued by companies that have a good reputation. The issuer is also a leader in its industry sector in terms of revenue and dividend distribution.

2. Income Stocks

Companies with this type of stock pay dividends greater than the average dividend of the previous year. The consistent movement of dividend yield makes income stocks suitable for conservative investors who are looking for frequent returns.

3. Growth Stocks

Growth stocks experience a higher growth rate than the market average. This type of stock is further divided into two, namely well-known and lesser-known. Well-known growth stocks have similar characteristics to blue chips, while lesser-known tend to be less popular as they are usually issued by smaller companies.

4. Speculative Stocks

Speculative stocks have the potential to generate large profits in the future, but their price movements are volatile and unpredictable. The dividend distribution is also inconsistent. Aggressive investors (high risk profile) often choose this type of stock.

5. Counter Cyclical or Defensive Stocks

The prices of counter cyclical stocks remain stable amidst economic turmoil or certain business conditions. For example, during a recession, these types of stocks provide high capital gains and dividends thanks to the resilience of the issuer. Companies that issue defensive stocks are generally engaged in consumer goods.

The opposite of this type of stock is cyclical stocks.

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Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).

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