In the stock investing world, there are always ups and downs associated with every type of security. That is why investors need to become as educated as possible on their options and understand exactly what they are buying. For example, most companies allow you to choose between common and preferred stock when you gain ownership in their organization. Before you make your purchase, you should understand what preferred stock really is and why you would want it.
What Is Preferred Stock?
According to Investopedia.com, a preferred stock is one that guarantees that you will get paid a dividend before common stock owners get paid, but does not offer voting rights. This means that in the event of a collapse or liquidation of assets, you would get paid before common stock owners get paid. But you would not have the ability to vote on measures that could prevent that collapse.
Something For Everyone
According to AccountingCoach.com, preferred stock comes in many forms. Some of the more common forms are convertible, participating, and cumulative. The type of preferred stock you can buy and the kinds of payment features that the stock offers varies from company to company. It is always a good idea for an investor to learn as much as possible about the preferred stock of a particular company before investing any of their money.
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