If you're looking to make your money work for you, one of the options is the invest in the stock market. When you buy a stock on the stock market, you are essentially buying a small portion of the company. This gives you the right to vote on certain decisions of the company too! Before you dive in and bet your money on something you heard from a friend of a friend of an uncle's nephew, here are the most typical types of stocks you see in the market:

Blue Chip Stocks

Blue chip stocks are eventually the big boys. The companies here usually have very strong fundamentals and good reputations that has helped them last for decades or even centuries! Most of the time, they are market leaders in their industry so it is very likely you have used their products and services at some point in your life. You’ve probably heard of Nestle and Maybank, right?

Pros: As mentioned, strong fundamentals and reputation means these companies probably will not go bankrupt any time soon. They provide investors with steady profits and don’t usually take up a lot of risk. Even when they do, they probably have plenty of spare cash in case things go wrong. Besides, some of the Blue Chips in Malaysia are government linked corporations (GLC) so you know they have the support of our beloved government. Not only that, a lot of them are essential in our daily lives, such as the big banks and the company powering the computer you’re reading this on - Tenaga Nasional Berhad.

Cons: Lower risks means lower rewards. Stable, mature blue chips rarely have a lot of growth, so don’t expect your money to double or triple even if you held it for the next 5 years. Also, due to the “boring” characteristics, plenty of young investors prefer looking elsewhere for faster profits, further slowing down the growth of blue chip stock prices, causing some sort of a negative feedback loop.

Dividend Stocks

Dividends are payments made by the company to their shareholders every once in a while. This can be a form of profit sharing with investors every time the company reports their earnings, a way to reward investors for "believing in their company", or a way to attract more investors to buy their stocks. Real Estate Investment Trusts (REITs) like SUNREIT (yes, the Sunway Pyramid guys) and IGBREIT (MidValley guys) are some of the most reliable dividend paying stocks.

Pros: Most companies that pay steady dividends are mature companies who have been profitable for quite some time, and thus have little risk of going down. Regularly receiving dividends also mean that you can still consider keeping shares of a company even if the price went down because the dividend payments can outweigh the loss in value in the long term. Dividends can also be reinvested (some companies provide dividend reinvestment plans) and the law of compounding can be a good friend here.

Cons: Since dividends are taken out from part of a company's earnings and revenue, the company will now have lesser cash to reinvest or expand their company. Hence, companies that give out dividends will have lesser growth opportunities. Some companies might also reduce their dividend yields during tougher times, making it less attractive compared to other forms of investments (e.g. a company's dividend % is lower than fixed deposit rates).

Growth Stocks

Growth stocks are exactly what they sound like - buying shares of companies that are growing. This can include small and medium companies that are yet to be profitable, are just turning profitable, or have even better earning prospects coming up. Although at the simplest level, you are betting that the company will become bigger and better in the future, growth stocks are not to be confused with speculative stocks. Growth companies usually have good fundamentals, valid and demanded products and services, and trusted management with a clear vision for the future.

Pros: Money, money money! There is practically no limit as to how much a growth stocks can grow. There have been stocks that have gone up 2x, 5x, 10x and that is the ultimate reward for investors who saw opportunity before anyone else.

Cons: Even though there are no upper bounds to your profit, sometimes these companies take time. It could take a couple of days, weeks, months, or even years until you can reap what you sow and not everyone has that kind of patience or will to hold on to a stock, especially when it starts tanking.

Hopefully, this article has helped you understand the stock market better and brought you a few steps closer to the edge of the deep end of the investing pool. It'll also help to choose the type of stocks you want to buy if you know what kind of investor you are. At the end of the day, if you don't jump in, you'll never know how cold the water really is!

(ALSO READ: 5 Ways To Start Your Journey To Financial Freedom)

*We are by no means certified financial planners and this article should be taken as knowledge sharing and not official financial advice. Investments have risks and you should do due diligence before investing. Only invest money you're ready to lose. The stocks mentioned in this article are not buy or sell suggestions.