Blue Chip stock: Stock of a large, national company with a solid record of stable earnings and/or dividend growth and a reputation for high quality management and/or products. More generally, anything of very high quality. Examples could include IBM, Johnson & Johnson, and 3M.

The market capitalization of Blue chip stocks is massive. Johnson & Johnsons market capitalization can range between $150 and $200 Billion dollars.

Large Cap stock: A company whose market capitalization is over $5 billion dollars. If a companies shareprice was $20, and there were 1 billion shares outstanding, the market capitalization would be $20 billion. (shareprice X the number of shares outstanding. Large Cap stocks tend to be established companies. Larger company stocks are favored by mutual funds because they have greater liquidity or more shares outstanding which makes them easier to buy and sell. Large company stocks like blue chip stocks receive a lot of analyst coverage.

Mid Cap stock: A company whose market capitalization falls between $1billion and $5 billion. These companies are fall between a small company that is still growing and a large cap stock that is more established.

Small Cap stock: A company whose market capitalization falls between $500,000 and $1 billion. These companies do not have as many shares outstanding and tend to be younger companies that are reinvesting their profits back into the company.

Micro Cap stock: A company whose market capitalization is under $500,000. These companies shares are usually very thinly traded (less than 100,000 shares per day). They can be very volatile and offer a large amount of risk and potential reward. Micro Cap stocks may not always move with the market. It is more difficult for a mutual fund to buy shares of a microcap stock because any large order to buy the stock will quickly move the stock. As a result, a micro-cap fund manager might have to spend several weeks or months building a position in the stock. A large sell order can also drive down shares quickly.

Growth stocks are shares in companies that are exhibiting above-average and accelerating earnings and sales growth. These companies usually reinvest their earnings back into the company so that they can continue to grow and expand their business.

These types of companies can be very volatile and experience large swings in earnings and sales on a quarterly basis.

Value stocks are companies that investors, analysts and fund managers believe are values. This could be for a number of reasons including a low Price to Earnings ratio (P/E), more assets than liabilities, shareprice that is at book value or less, and other assets that might be overlooked by investors. Maybe the stock was sold off due to earnings that missed estimates, or the company lowered guidance for the year. This type of news can cause a companies stock to decline and sometimes the selling can be overdone.

Cyclical stocks are stocks of companies whose earnings fluctuate with the business cycle. When patterns in the economy are favorable to their particular industry, the earnings of cyclical companies peak. When the economy changes direction, they are more prone to suffering earnings declines.

Defensive companies sell products and services that experience demand in a growing economy as well as a recession. Examples might be healthcare, food, household products, and utilities.

Income or dividend paying stocks pay out a larger dividend relative to other companies. The dividend yields on these securities are above average for stocks and frequently are competitive with the returns on fixed income investments and REITS. Income stocks include utilities (gas, water and electric), and some financials.

Preferred stock could be considered a fixed income security because the yearly payment is stipulated either as a coupon (e.g., six percent of the face value) or as a stated dollar amount. Preferred stock is junior, or subordinate to all bonds issued by the company. Preferred stockholders do not generally participate in company management, and they have no voting rights such as the common stockholders possess.

There are different types of preferred stock available in the market. If the stock is cumulative, the claim to dividends may be carried over from one year to the next; if the company falls behind in dividend payments, it must make up the entire amount before paying dividends to the common stockholders. Another variety, called convertible preferred stock, carries a contractual clause entitling the holder to exchange it for shares of common stock of the same company within a stock. Unlike typical preferred stockholders, a participating preferred stockholder not only receives dividends, but shares additional earnings with the common stockholders. Also, many preferred stocks are callable, and may be redeemed by the issuing company at a given call price within a specified number of years after issuance.