What is the difference between preference stocks and ordinary stocks? Which of them is good?
Here’s a simple definition:
- Ordinary stocks: You are entitled to the residual of the company after debt.
- Preferred stocks: You are entitled to a fix amount ($5 per share) and possibly dividend. Preferred stock gives you right over ordinary stocks. This means if the company goes under, you will receive your money first than ordinary stock holders. Chances are, you will get regular dividend for your preferred stocks as well.
So this means…
- If you are a dividend investor, try preferred stock as it is usually fairly consistent.
- If you are a capital gain investor, ordinary stock would be a better choice for you.
If you decide to go down the capital gain investor route, I would recommend you to learn value investing and look into using stock options to maximize your return.
Here’s a free training video that outlines this investing approach: Free training: How to maximize wealth on the stock market (45 min)