Common Stock Versus Preferred Stock
When you are new to the stock market there are a lot of terms you will come across that are going to be confusing to you - at least at first.
The trick is not just to find out what they are, it's to become familiar with them and what they mean.
A good example of this is common stock and referred stock.
These are basically two different forms of stock that you can buy.
The names will give you a rough idea of what to expect, but don't make the common assumption that you are better off buying preferred stock.
While the names do refer to what each stock is all about, they can give you the wrong idea to a certain extent.
Most people end up buying common stock when they start dipping their toes into the stock market.
Common stock is common knowledge, you might say.
Basically when you buy this type of share you are buying shares in a company or organisation.
Most people are familiar with this kind of stock but when it comes to preferred stock you might be a bit confused as to what it means.
Preferred stock is concerned with stockholders.
Some companies have stockholders that are called preferred stockholders.
In contrast if you bought shares you would be a common stockholder in that company.
The advantage of being a preferred stockholder is that you will get preference in receiving a payment for your shares.
Needless to say this can be a good thing, but it depends on how you want to invest in shares in the first place.
It is easier to be a common stockholder than it is to be a preferred stockholder, and many people like the flexibility of this as they can buy and sell shares whenever they see fit to do so.
You do often stand a better chance of receiving a healthy income from your shares if they are of the preferred variety.
However you also need to bear in mind that because preferred shares are slightly more secure than common shares, they won't bring in the potential of a much higher income.
As with all types of shares you need to do your research before deciding which ones to invest in and which ones to steer clear of.
It could depend largely on whether you want an ongoing income from your shares or something a bit different instead.
The trick is not just to find out what they are, it's to become familiar with them and what they mean.
A good example of this is common stock and referred stock.
These are basically two different forms of stock that you can buy.
The names will give you a rough idea of what to expect, but don't make the common assumption that you are better off buying preferred stock.
While the names do refer to what each stock is all about, they can give you the wrong idea to a certain extent.
Most people end up buying common stock when they start dipping their toes into the stock market.
Common stock is common knowledge, you might say.
Basically when you buy this type of share you are buying shares in a company or organisation.
Most people are familiar with this kind of stock but when it comes to preferred stock you might be a bit confused as to what it means.
Preferred stock is concerned with stockholders.
Some companies have stockholders that are called preferred stockholders.
In contrast if you bought shares you would be a common stockholder in that company.
The advantage of being a preferred stockholder is that you will get preference in receiving a payment for your shares.
Needless to say this can be a good thing, but it depends on how you want to invest in shares in the first place.
It is easier to be a common stockholder than it is to be a preferred stockholder, and many people like the flexibility of this as they can buy and sell shares whenever they see fit to do so.
You do often stand a better chance of receiving a healthy income from your shares if they are of the preferred variety.
However you also need to bear in mind that because preferred shares are slightly more secure than common shares, they won't bring in the potential of a much higher income.
As with all types of shares you need to do your research before deciding which ones to invest in and which ones to steer clear of.
It could depend largely on whether you want an ongoing income from your shares or something a bit different instead.
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