Simplifying the Stock Market

Cyclical stocks: The earnings on these stocks are tied very closely to the overall business cycle and economic state. Examples include the housing industry and industrial equipment

Defensive stocks: These remain stable in any economic conditions, such as food companies, drug manufacturers or utilities. These are stocks in companies that manufacture the necessities that people will need in any economy.

Income stocks: These pay higher-than-average dividends over a sustained period. They are typically long-established companies with stable earnings or utilities such as phone companies.

Speculative stocks: These are stocks in emerging companies that are speculating on their future earnings and revenue. These are risky investments since the company may or may not reach their intended future goals.

One of the keys to making money in the stock market is patience. The market traditionally earns money over time. Therefore, if you are looking to hold onto stocks for a number of years, experts say you should end up ahead. Conversely, buying stocks for the short term is far more risky because stocks can be quite volatile in a shorter time frame.