13. Investments. Preferred Stock
Tuesday, June 23rd, 2009Hoping you enjoyed last weeks post in the investing series, where we looked into investing in stock options. We are nearing the end of our segment on alternative methods of investment. After just a few more segments, you should have an intimate and thorough knowledge of all kinds of investment opportunities that simply elude most casual investors. And why?
It’s all because they think this kind of thing is too advanced for them, and so they never bother to learn how easy it really is. They keep doing the same old thing with their money, time after time. That might work some of the time, but you’ll never that you’re doing the absolute best thing at any given moment. That’s why it pays to be educated.
Investing In Preferred Stock
This time, we’re going to talk about preferred stock. Preferred Stock is very much like typical stock investments in that you’re buying a “share” (or multiple shares) in a publicly traded company. The real difference is that with a preferred stock, you’re given a fixed dividend that will be paid out at specific times, rather than the performance dependent variable dividend that is given to holders of common stock.
In addition to making this a more stable form of investment, it’s also the case that if a company does have to liquidate, then you’ll be paid off before common stock holders. Debt holders, however, still come first.
The Benefits
Another thing to note about Preferred Stock is that it’s callable. This means that at any given time, the company can choose to buy it back from you. However, this can be seen as a benefit, because to do so, they usually have to pay you a premium.
For those looking for a less volatile investment than common stock, but one that works roughly the same way, preferred stock trading is an excellent avenue to look down.
You can buy and sell Preferred Stock the same way you would your common stock investments – just ask your broker. Be warned, however, that depending on which broker you use, you might need to maintain a minimum balance in stock in order to hold a preferred account.
See you next week for part 14 of Investments.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009
