Ordinary actions
This is the most common form. We buy them if our main objective is to realize capital gains. They confer certain rights, including the following:
Right to dividends (part of company profits)
Right to vote (for example, to elect directors or vote on certain decisions concerning the company)
Ownership of assets (i.e. a share of the company’s remaining assets if the company is dissolved).
However, ordinary shares have certain disadvantages:
The dividend is never guaranteed and may vary.
If the company that issued them goes bankrupt, joint stockholders will be repaid last, after creditors and preferred stockholders.
Preferred shares
Preferred shares are for people who want regular income. As their name suggests, they come with certain privileges:
Fixed and guaranteed dividend (established at the time the share is issued and paid in priority before the tip on ordinary shares)
Advantageous tax treatment
If the company goes bankrupt, preferred stockholders are paid off before common stockholders.
These privileges have a downside: preferred shares generally do not carry voting rights.
In other words: Common or preferred stocks are suitable for most investment portfolios, but remember that they all carry risk. Be sure to diversify your portfolio to ensure the health of your savings.
