Main types of stocks and their features

The structure of corporate capital begins not with calculations and schemes, but with understanding how a business formalizes ownership and distributes profits. Shares are legally documented stakes in a company that reflect an investor’s rights to a portion of assets and profits. Public corporations issue securities to attract capital from the market, while private ones distribute shares among a limited circle of owners. In both cases, it is not just about the asset, but about the right to influence, participate, and receive dividends. The main types of shares represent not formality, but the foundation of a business structure that determines who manages, who receives income, and who bears the risk. When choosing, it is important to consider not only the category but also internal parameters: liquidity level, degree of risk, voting rights, and dividend payment order.

Preferred Shares: Fixed Income without Voting Rights

The issuance of preferred shares allows companies to attract investments without losing control. Unlike common shares, they do not grant voting rights at shareholder meetings, but provide fixed income and priority in dividend payments and asset distribution in case of liquidation. The main types of shares in this segment include:

1. Cumulative. Accumulated but unpaid income on them is retained and paid later. Example: “Gazprom Neft” suspended payments during the crisis, but later compensated for the accumulated amounts.
2. Non-cumulative. In the absence of profit, the company is not obligated to compensate for missed payments. Such shares are riskier but often bring higher returns.
3. Convertible. Allow for future exchange of preferred shares for common shares at a predetermined ratio. For example, in 2020, “Tatneft” introduced a series with the possibility of conversion within 3 years.
4. With a fixed rate. Income on them is predetermined in the charter or issuance documentation, usually expressed as a percentage of the nominal value, for example, 10% per annum.

The advantage of such securities remains predictability. For example, in 2023, Surgutneftegaz’s preferred shares provided a yield of 15.4% per annum due to the company’s high foreign exchange reserves. However, an investor holding only preferred shares cannot influence strategic decisions.

Common Types of Shares: Voting Rights, Main Risks, and Share in Success

This type of securities represents the most common form of participation in capital. The main types of shares with voting rights allow owners to participate in management—vote at meetings, elect the board of directors, and approve strategic initiatives. Their profitability is not fixed, depending on the company’s profit and the board of directors’ decisions. At the same time, potential returns can significantly exceed those of preferred securities, especially in the business growth phase.

A classic example is Lukoil’s shares. Ordinary shares in 2022 not only provided holders with high dividends (up to 850 rubles per share) but also the right to vote on a share buyback program worth 3 billion dollars, thereby increasing the capitalization of the remaining shares.

It is also worth highlighting a special subcategory—voting shares with restrictions. In some cases, a company may establish a rule whereby one shareholder can vote with no more than a certain number of shares, reducing the risk of monopolization.

In practice, such securities involve risks: in case of bankruptcy, the holder receives payments last, and in the absence of profit, remains without dividends. However, in the case of rapid capitalization growth, these securities grow faster than others.

Classification of Main Types of Shares by Issuer Type and Trading

In addition to differences in rights, the main types of shares are classified by issuer type, liquidity, and trading conditions. Systematization helps to better understand the risk structure and potential.

Exchange-Traded and Over-the-Counter

Exchange-traded shares are traded on organized platforms: Moscow Exchange, SPB Exchange. They undergo listing, comply with information disclosure requirements, and have high liquidity. Over-the-counter securities, such as shares of private companies or non-public JSCs, are more often sold through private transactions, have low liquidity, and a high degree of risk.

National and Foreign

Russian investors can acquire shares of both domestic issuers (for example, Polymetal, MTS, Yandex) and foreign ones—through depositary receipts or directly on foreign exchanges. For example, shares of Apple, Tesla, and Coca-Cola are traded on the SPB Exchange with a full link to NASDAQ dynamics.

Ordinary and Fractional

The emergence of investment platforms (Tinkoff Investments, VTB My Investments, SberInvestor) has made it possible to purchase fractions of shares, for example, 0.05 Google shares or 0.2 Microsoft shares. This has expanded access to high-priced shares—one Amazon share was priced at $3200 in 2021.

This typology allows for a more precise portfolio formation based on goals: speculation, accumulation, protection against inflation, or participation in management.

Legal and Economic Differences: How Rights Determine Income

The main types of shares differ not only in name and nominal value but also in the legal consequences of ownership. Each type of security is formalized differently and endows the investor with a certain set of powers. For example:

1. Right to dividends. Only shareholders registered in the register by a certain date (the so-called dividend cutoff) receive income. For common shares, it may vary, for preferred shares, it is fixed or depends on net profit.
2. Right to vote. Only common shares grant it in full. Some preferred shares have limited voting rights if the company does not pay dividends for two consecutive years.
3. Right to a portion of assets. In case of liquidation, creditors receive payments first, then preferred shareholders, and only then holders of common shares.
4. Conversion and restrictions. The charter may stipulate the right of conversion, preferential buyback, or restrictions on transfer to certain individuals (for example, when selling strategic enterprises).

Developing a corporate structure requires a precise balance: issuing too many preferred shares reduces the attractiveness of common shares, an excessive proportion of voting securities weakens management.

Portfolio Application: How Roles of Different Types of Shares Are Distributed

Investment strategy directly depends on which securities are included in the portfolio. The main types of shares perform different functions:

1. Preferred shares—source of stable income. Suitable for those building a portfolio for regular payments. For example, Bashneft’s or Mechel’s preferred shares regularly rank high in dividend yield—from 12% to 18% per annum.
2. Common shares—instrument for capital growth. Shares of Yandex, Tinkoff, Polymetal have shown growth of 3–5 times in recent years. Ideal for long-term capital growth.
3. Foreign securities—protection against devaluation. Owning shares in dollars or euros hedges against inflation and currency risks. ADRs on American companies are particularly popular.
4. Over-the-counter—speculative interest. Shares of small JSCs can generate income through mergers and acquisitions but require analysis and patience.

An optimal portfolio considers the share of each type depending on the goal: protection, growth, stability, flexibility.

Capital Structure as a Financial Instrument

Understanding how the main types of shares are structured allows for a more informed use of the market. There is no universal tool—each type plays its role in the system. A strategic investor builds a portfolio, combining liquid common shares with predictable preferred shares and high-yield ADRs. Passive income, business control, tax benefits, inflation protection—all of this is embedded in the capital structure through share types.

The market is constantly changing, and along with it, investor behavior transforms. But the foundation remains: understanding the rights, returns, and ownership conditions of each type of share determines the effectiveness of any investment.