Categories of Stocks
This is how stockbrokers generally categorise the different types of stocks.

Blue chips are companies with years of unbroken track record of high earnings and good dividends. They have strong fundamentals, give good dividends (5-8%) and have well-established businesses.

On the other end of the spectrum are the third liners which are companies with poor fundamentals.

The second liners are those that are in-between the blue chips and the third liners.

Growth stocks are companies that give high growth. They retain their earnings to further expand their businesses and therefore usually give low dividends but they should give high capital gains as their share price increase with the business.

Cyclical stocks are those that are dependent on the economic cycles. For example, heavy industries and steel that tend to do well when there is economic expansion, and be depressed when the economic situation is bad. They are companies whose earnings track the business cycle.

Income stocks pay very high and generous dividends e.g. cigarette companies.

Defensive stocks are good for investment when the economic outlook appear gloomy. These are stocks that are least affected by the economic downturn, such as those in the food and consumer businesses. They are shares with future earnings that are likely to withstand an economic downturn.

Categories of Investors
Just as there are different types of stocks, there are also different types of investors. There are the institutional investors which are mainly the pension, insurance and unit trust funds among others. There are also the retail investors for the individual investing in the capital market, and in Malaysia, the retail investor comprises 60-70% and therefore have a strong influence on the market.