Posts Tagged ‘Common stock’

Differentiating Between Common Stocks and Preferred Stocks

Saturday, June 12th, 2010
NASDAQ in Times Square, New York City, USA.
Image via Wikipedia

When we talk about stock market, there are basically 2 types of stocks that are traded within the stock market, preferred stocks and common stocks. In short and in simple words, the better you understand the difference between both of these, the better you will trade and make profits. Preferred stocks can be explained in a way that such stocks can be said as being quiet alike bonds and why they are alike is because of the returns; just like bonds, the returns are fixed. When we consider this aspect of preferred stocks, one thing becomes really clear that the risk factor is limited making these stocks attractive for a trader. When you deal with preferred stocks, you are known as a preferred shareholder that means having preferential treatment attached with you with the dividends available; the first right of refusal is what you actually have, majority of the traders enjoy trading preferred stocks.
While on the other hand, common stocks are something like investing in the operations of the company or organization. Mostly when it is about investment, almost 80 percent of the investors would go towards common stocks. Although high risk factor is involved while trading in common stocks, but at the same time, they can prove bountiful, if an organization or company starts doing well from business perspective.
Talking about common stocks, they are available in different types and each type carries its own risk and potential; some might be too hard to trade while others can be real easy. This is decided by a stock’s composition that how hard or easy would it turn out to be that means considering the risk involved along with that stock’s overall performance. Common stocks are more risky compared to preferred stocks and if you are not much of a risk taker then it is advisable here that you must trade preferred stocks rather going with common stocks.
It is one’s mental capability and self satisfaction through which he or she chooses to go with either common or preferred stocks but both can give you loads of profits if fortune turns our in your favor plus, you make right moves at the right time as well. So, I guess that now you have a bit of information about preferred stocks and common stocks plus what are the major differences between the two as well. So, consider your options plus your characteristic before picking the type of stocks for trading purposes.

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