Diversify Your Portfolio: An Essential Guide to Action Modalities for Modern Operators

Why Do You Need to Understand Different Types of Shares?

Before investing your capital in stock markets, it is crucial to familiarize yourself with the multitude of available options and their specific characteristics. Each type of share offers a different risk-return profile that will define your strategy and your final results. By examining shares from multiple angles, an extensive classification emerges; however, this analysis will focus on the most actively traded modalities and the secondary categories that complement your knowledge of rights and patrimonial responsibilities.

What Do Shares Represent in the Stock Market?

Shares constitute one of the fundamental pillars of investment instruments circulating in stock markets. The specific nature of your holdings will directly determine your potential benefits, related obligations, and the level of risk assumed.

A share is a divisible portion of corporate capital. When you acquire it, you automatically assume the status of a patrimonial owner in that company. However, publicly traded positions represent only a fraction of the total corporate equity. Certain shareholders hold larger volumes, giving them greater influence in strategic decisions and priority in profit distributions. Additionally, they have access to assemblies, participate in management proposals, and enjoy additional rights.

Price dynamics respond directly to business performance: when the company strengthens its market position, its quotations rise proportionally; during contraction periods, they experience correlated declines. The investor’s final return consists of two variables: the difference between purchase and sale price, plus the dividends distributed. These movements are fundamentally driven by supply and demand forces.

Overview of Main Share Modalities

Ordinary Shares: The Classic Long-Term Option

Ordinary shares represent the standard issuance of corporations, functioning as an alternative capitalization mechanism without resorting to bank debt.

Their main attributes include voting rights at ordinary assemblies (with proportional weight to the volume held), participation in profit distributions according to the amount held, and indefinite permanence as long as the company exists. Ordinary shareholders trade the expectation of exponential returns, although they face significant volatility with difficulties in quickly liquidating positions. The risk is substantial: in case of corporate insolvency, the investment drops to zero.

Preferred Shares: Guaranteed Income Without Decision-Making Power

This modality reverses the risk-return equation of ordinary shares. Although they lack political rights within the corporation, they offer guaranteed returns through fixed predetermined dividends. Regardless of business performance, these payments remain constant, providing predictability to holders.

The distribution structure favors these shares: preferred dividends are paid before any payments to ordinary shares. In bankruptcy situations, preferred shareholders have priority over ordinary shareholders for reimbursement. This combination attracts investors seeking secure cash flow without interfering in corporate management. Additionally, their higher liquidity facilitates quick divestments.

However, an important limitation exists: if the corporation prospers exceptionally, ordinary shares capture greater value through variable dividends and capital appreciation, while preferred shares remain with static returns.

Privileged Shares: A Hybrid of Both Modalities

These shares combine features of both previous categories: conferring political rights along with fixed economic benefits. Their issuance requires majority approval from the shareholders’ assembly.

Secondary Classifications by Origin and Trading

Registered Shares: Issued in favor of an explicitly identified owner.

Bearer Shares: Physical possession of the title confers automatic ownership.

Private Shares: Not publicly traded, typically belonging to closed medium-sized companies.

Listed Shares: Capable of open trading on recognized exchanges.

Redeemable Shares: Exist under a defined timeframe; after the period, they automatically cease.

Short Selling Shares: Enable bearish speculation; the operator profits if quotations decline.

Treasury Shares: Owned by the issuing company itself; their repurchase is often seen as a bullish signal about future valuation.

Comparative Matrix of Modalities

The first matrix contrasts the three main modalities. The second compares categories that often overlap with the first classification (for example: a registered share can be simultaneously ordinary or preferred).

Of particular relevance are three modalities from the second table: listed, short, and treasury. Listed shares and short positions operate on public exchanges, with opposite directions. Their operation is accessible: the intermediary handles procedures while the investor simply issues buy/sell orders and sets volumes.

Treasury shares belong to the issuer itself. When a company impacts its own titles, it is often a positive indicator: management believes that the quotation is undervalued relative to intrinsic and fundamental values. No one has better information about balances, flows, and operational position than the management itself; this repurchase reflects confidence in future appreciation.

Practical Investment Strategies by Share Type

Trading with Listed Shares: Microsoft Case

Consider a real scenario: investing in Microsoft during July 2022 (bullish month):

• Open: 254.84 USD
• Close: 277.64 USD
• Low: 245.70 USD
• High: 281.60 USD

With a unit lot, the difference would represent a theoretical gain of 22.80 USD; with a volume of 2 units, 45.60 USD. These figures are reduced after commissions and overnight financing. Additionally, Microsoft paid dividends on August 17, outside the evaluated period.

Reverse Operation (Short Term):

In August of the same year:

• Open: 275.36 USD
• Close: 260.51 USD
• Profit for sellers: 14.85 USD per unit
• Loss for buyers: Equivalent amount

Bear speculators would have captured gains, while those holding long positions faced setbacks. Simultaneously, the August 17 dividend benefited buyers and penalized short sellers.

Investment Methodology by Modality:

For ordinary shares: Requires formal documentation, contract signing, and endorsement procedures if purchased from third parties. Larger investments confer greater decision-making influence and better distributions. Disinvestment requires finding a willing buyer and executing legal procedures again.

For preferred shares: More straightforward operation due to higher liquidity; ideal for those seeking predictable passive income without managerial involvement.

For privileged shares: Requires prior approval from the shareholders’ meeting.

For treasury shares: Only accessible if you manage an entity. Small companies can create private issues; large corporations use their own stock.

Final Recommendations for Investors

Shares have shown historical appreciation over long horizons. Whether you are an active trader or a passive investor, the common goal is to capitalize on price increases.

Before committing capital, perform thorough fundamental analysis. If you adopt a traditional buy-and-hold strategy, you must accept that liquidation will face restrictions: you will need sufficient demand to unload your position. With trading through intermediaries, you practically buy and sell without restrictions as long as markets are operational.

Short selling promises accelerated gains but involves amplified risks. Historically, stock markets gradually rise over extended periods; however, corrections tend to be abrupt and concentrated in short weeks.