Author Topic: Difference between common stock and S&P500  (Read 1655 times)

Cornbread OMalley

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Difference between common stock and S&P500
« on: January 09, 2017, 10:52:29 AM »
Office mate asked me about the difference between common stock and the S&P500.  Told him I didn't know.  What is the difference?  Is there a difference?

[ETA:  This was in context of my office mate trying to figure out whether to invest more in common stock or the S&P500.  I never heard investing expressed this way.]
« Last Edit: January 09, 2017, 11:01:15 AM by Cornbread OMalley »

Cornbread OMalley

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Re: Difference between common stock and S&P500
« Reply #1 on: January 09, 2017, 01:48:57 PM »
Thanks for the answer!  Totally helped me out.

talltexan

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Re: Difference between common stock and S&P500
« Reply #2 on: January 09, 2017, 02:33:22 PM »
Usually "common stock" is brought up as being distinct from "preferred stock".

Common stock is, essentially, an ownership stake. Preferred stock is more like a bond, i.e. there is a fixed rate of interest you get paid, but it includes a premium above what normal bond-holders get paid in exchange for you having a riskier claim than those bondholders.

It probably doesn't make sense for the average Joe to be investing in preferred stock.

seattlecyclone

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Re: Difference between common stock and S&P500
« Reply #3 on: January 09, 2017, 05:19:18 PM »
Yes, generally "common stock" is what most people think of when they think of stocks at all, and the funds you buy will usually buy common stock instead of preferred stock.

The S&P 500 is a list of 500 of the largest US-based companies. Many index funds exist that buy stock in all 500 of these companies.

Cornbread OMalley

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Re: Difference between common stock and S&P500
« Reply #4 on: January 10, 2017, 07:15:37 PM »
Thanks again, everybody!  Very helpful information!

dividendman

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Re: Difference between common stock and S&P500
« Reply #5 on: January 10, 2017, 07:33:50 PM »
Usually "common stock" is brought up as being distinct from "preferred stock".

Common stock is, essentially, an ownership stake. Preferred stock is more like a bond, i.e. there is a fixed rate of interest you get paid, but it includes a premium above what normal bond-holders get paid in exchange for you having a riskier claim than those bondholders.

It probably doesn't make sense for the average Joe to be investing in preferred stock.

Preferred stock is also an ownership stake.