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What is the difference between common stocks and preferred stock?

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10th Nov 2009 by Daniel Cross, ChFC

Common stock is the most familiar type that investors are familiar with. Holders of common stock are, in fact, part owners of that company and take part in its profits and dividends should the company have any. Shareholders also gain voting power in the company and take part in major policy decisions and elect board members.
Preferred stock differs in that, while being a form of ownership, there are no voting rights attached to it. In the case of a bankruptcy, preferred stock must be paid before common stock. The biggest drawback, other then lacking control rights, is that the stock gives substantially less returns than could be made with common shares.

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10th Nov 2009 In Stocks 1 Answers | 322 Views

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