Stock is a security that represents ownership in a corporation. A bond, by contrast, is debt issued by the company, basically an IOU. Bondholders are lenders; stockholders are owners. In the event of trouble, bondholders have a superior claim, but they don't share in the company's success the way stockholders do.

When you buy company stock, you can make money in one of two ways: through dividends, or through price appreciation when you sell your shares. The dividend payment you receive reflects your share of the company's profits. Dividends are usually paid quarter

Over the counter (OTC) stocks - OTCs are U.S. stocks not traded on any of the major exchanges (see penny stocks). OTC stocks are traded by telephone or computer and tend to be newer, smaller and riskier than exchange-listed stocks. They are also more thinly traded, which makes them harder to sell when things are going wrong. The Pink Sheets, published daily, are used to look up quotations on thousands of these stocks, as well as the names of dealers who make a market in them. It's much harder for an investor to be sure of getting or paying a fair price in OTC trading, and companies that succeed typically grow out of OTC and get listed on a formal exchange. Some stocks in this category have been found out to be fictitious companies. These are extremely risky investments!

Common stock is the type that is purchased most often. Dividends paid to common stock holders can vary depending on company profits. The main benefit of common stock is through price appreciation.

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Tracking stock - A tracking stock is a type of common stock issued by a corporation alongside its regular common stock. However, the dividends and gains of a tracking stock are tied to the performance of a particular subsidiary of the corporation. Tracking stocks do not have voting rights or a legal claim to the general assets of the corporation. A tracking stock is sometimes setup when a company is going to spin off part of the corporation. (Example - Sprint PCS (PCS): One year return on investment - negative 10%; two year return on investment - 300%; annual dividend yield - none).

Value stocks - Value stocks typically have a lower price-to-earnings ratio, a lower price-to-book ratio, and pay more dividends than growth stocks. The idea is that a value stock is undervalued by the market. (Example - Phillip Morris (MO): One year return on investment - negative 6%; five year return on investment - 40%; annual dividend yield 7.0%).

Penny stocks - These stocks don't sell for a penny, but refers to recently issued stocks that generally sell for less than $5 a share and are traded over the counter rather than on a major stock exchange. Penny stocks are usually issued by small, relatively unknown companies and are lightly traded. This makes the stocks more difficult to research and more prone to price manipulation than larger, better-establis

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