Speculative shares These are the shares which are traded in the company which have a lot of speculations.

Shares cannot be put into one category strictly because the characteristics of the shares areoverlapping in the sense that the blue-chip shares which are in great demand in the market fallunder blue-chip shares and speculative shares. Further Classification One more classification of shares is given by one of the most successful and respected investor all around the world Peter Lynch. According to him the shares can be classified into 6 types Slow Growers Fast Growers Stalwarts Cyclicals Turn-around Asset plays Slow Growers These are large companies which have the growth rate equal to the industry growth rate or their growth is equal or slightly faster than the GDP (Gross Domestic Product). Fast Growers These are shares of newly started successful companies which have a very good growth rate (the rate is usually 10 to 25 percent) per year. Stalwarts These are shares of very large companies which have stable growth. The dividend payout ratio is high. These companies are growing but not rapidly as in the case of fast growers. Cyclicals These are the shares of the company which is going through the business cycle or there is variation due to economic factors. Turn-around These are the shares of the companies which have started performing very well. Thesecompanies were fairing badly in the past and all of a sudden there is a turn-around in theirperformance. www.kgandhi.anindia.com Asset plays These are the shares of the companies who are not given any recognition though they have a large asset base. Advantages Equity shares give greater returns if the company makes profits. It is in comparison todebenture holders or preference share holders.

 There is a tremendous amount of capital appreciation if the shares are of a good performing company. The equity shares are easily transferable. The equity shares are traded at the stock exchanges so they can be bought and sold easily. These can be easily liquidated. The equity share holders have got the right to vote in the annual general meeting. Only the equity share holders have the right to choose the board of directors. Equity share holders have the right to oppose any of the decisions taken by the boardof directors. This is what happened when Mr. Ramalinga raju tried to buy Maytas company Disadvantages No doubt equity shares have attractive and better returns but in case the firm has notperformed well or is going for diversification or is investing in some venture then theprofits carried forward will be more and the dividends paid will be less. In worst cases if the company goes bankrupt then it is dissolved. The assets are soldand the money obtained is distributed amongst the stake holders then only ifsomething is left out after it is distributed to debenture holders and preference shareholders it is given to equity share holders. No doubt equity shares have both advantages and disadvantages but the fact is that equity shares are the most sought financial instruments for both investment or for speculation. Preference Shares These are other type of shares. The preference shares are market instrument issued by thecompanies to raise the capital. Preference shares have the characteristics of both equityshares and debentures. Fixed rate of dividends are paid to the preference share holder as incase of debentures, irrespective of the profits earned company is liable to pay interest topreference share holders. Types of Preference Shares Preference shares are divided into; Cumulative & Non cumulative shares Redeemable & Non-redeemable Convertible & Non-convertible shares Participating and non-participating

www.kgandhi.anindia.com Cumulative & Non cumulative shares Suppose a company does not make any profits for two successive years and makes hugeprofits in the third year. Then the people who have cumulative shares will get the interest ofthe three years and in case of non-cumulative share holders they do not receive the interest ofpast two years. Redeemable & Non-redeemable The redeemable shares are redeemed within the life time of the company or before thecompany closes down or to say that these shares have a maturity period. In case of non-redeemable shares they mature only upon closing down of the company. Convertible & Non-convertible shares Classes of shares which can be converted to other forms of shares or securities are called asconvertible shares. Whether they are converted to equity shares, debentures depend on therules laid down by the company. If the shares are not convertible to any other security on theirmaturity period are called as non-convertible shares. Participating and non-participating A company goes bankrupt and is dissolved. Now its assets are sold and liabilities are paid up.First debenture holders are paid then preference share holders and at last the equity shareholders. After paying up each one of them still there is some surplus amount left now if theinvestors have participating preference shares then the surplus amount left will be distributedequally between equity share holders and participating share holders. These are very lesspreferred in the market because the investor is looking out for long term investment and goodreturns. Advantages These yield fixed rate of returns Preference is given compared to equity share holders while distributing the dividends and once the company is dissolved. Its a hybrid instrument having some of the characteristics of debentures and equity shares. Disadvantages They do not provide the investor with any of the voting rights. If the company gets huge profits then they wont get any extra bonus