stock market graph with pen

Common Stock vs Preferred Stock: What’s The Difference?

Looking for another way to invest and expand your portfolio this year? Maybe you’ve got a portfolio full of mutual funds and you’re ready to tackle some company stocks. But when it comes to choosing common stock vs preferred, which is better? 

Before we dive in, let’s get back to investing basics: what is a preferred stock?

What Is Preferred Stock?

Preferred stock is a type of stock that allows you to have a piece of ownership in a company while taking on less risk than you would if you owned common stock. You could say a preferred stock is the perfect mix between common stock and a bond. Not only is it less risky than investing in common stock, it also pays out regular dividends and gives you ownership of the company. 

But while preferred stock can be a better option than bonds for profitability, it does have its downsides. If a company goes bankrupt, bondholders are the first to get paid (before preferred stockholders). And sometimes, if the company’s money is tied up, preferred stockholders may not get paid at all.

Most people who like the idea of investing with the potential for growth and regular dividend payments love investing their money in preferred stock. It’s definitely less risky than investing in common stock options, but it has the ability to make you more money than purchasing company bonds. 

What is Common Stock?

Common stock is a type of stock that provides investors ownership of a company, dividend pay-outs, voting rights, and the ability to capitalize on your initial investment.  

While common stock is what you see being traded on the stock market (and whose values can vary day by day), a bond is less volatile and ensures that its owners receive their investment—plus interest—after the maturation period.1  

Common Stock vs Preferred Stock

If you’re considering investing this year, common stock and preferred stock are both great options. But what’s better? 

Both common stock and preferred stock give you the opportunity for ownership in the company of your choosing. And like we said earlier, common stocks are more volatile than preferred. When you invest in common stocks, you’re choosing to ride the waves (both high and low) of the daily stock market. When the company is doing well, you’ll do well too. And the same goes for preferred stocks. But choosing preferred stocks is the safer investment option. The only risk with investing in preferred stock vs common stock is that you’re not going to be making as much as you could with common stock. But you’re also not going to lose as much if the company doesn’t do well. 

The best plan of action when it comes to investing and choosing stocks that help you meet your long-term financial goals is to differentiate your portfolio with both common and preferred stock options. A SageSpring wealth advisor is here to help you determine the best plan of action for your investing and financial needs. Get connected with a local advisor today and start investing in your financial future with a team you can trust. 

Any opinions are those of SageSpring Wealth Partners and not necessarily those of Raymond James. This information is intended to be educational and is not tailored to the investment needs of any specific investor. The information contained herein does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. You should discuss any tax or legal matters with the appropriate professional.

Jeffrey Dobyns
Jeffrey T. Dobyns


President, SageSpring | Financial Advisor, RJFS 

Jeffrey T. Dobyns

President, SageSpring | Financial Advisor, RJFS

Jeff Dobyns has enjoyed extraordinary success providing comprehensive financial planning to retirees, entrepreneurs, entertainers, and executives by taking the time to truly know his clients, understand their goals and develop and execute their ongoing, strategic, financial plans.

Jeff earned his finance degree in business administration from Ohio University and has held executive positions with financial planning firms for more than two decades. After serving as Vice President of Investments of Lykins Financial Group, CPA’s, in his hometown of Westerville, Ohio, Jeff moved to Nashville, Tennessee to found SageSpring Wealth Partners in 2002. As its President, Jeff has led SageSpring to remarkable success, holding the distinction of being one of Raymond James’ top independent contractor offices, and a member of its Chairman’s Council*, every year since 2008.

Jeff’s true calling, however, is working directly with clients, helping them plan their financial futures in a manner that aligns with their values and helps provide them with financial confidence. To help meet these goals, Jeff leads the team of Dobyns Wealth Team and also incorporates the expertise of attorneys, accountants and other professionals to provide quality financial, tax and estate planning, and ongoing asset and risk management.

As independent advisory businesses, neither SageSpring Wealth Partners nor Dobyns Wealth Team hold any assets on behalf of clients, with such custodial and brokerage services being provided by Raymond James. As a leader in wealth management, Raymond James has an exemplary reputation and today serves more than $930 billion in client assets through 8,200 financial advisors worldwide (as of 9/30/2020).

In order to meet the highest standards of professionalism and ethics in the industry, Jeff is a CERTIFIED FINANCIAL PLANNERTM practitioner**, a Chartered Life Underwriter and a Chartered Financial Consultant. Jeff is also a participant of the Dave Ramsey SmartVestor program.

Jeff’s work and personal life are both guided by his faith and the Christian principles of honesty, generosity, compassion, and integrity. Accordingly, Jeff devotes considerable time and resources to a number of causes, including serving as a board member of Men of Valor, a prison ministry and mentoring program. He is also on the advisory board of The Signatry of Middle Tennessee, which works with families to increase their charitable giving to their favorite causes. Additionally, Jeff is on the advisory board for Halftime Institute, an organization that coaches marketplace leaders to discern and engage in their life purpose. Lastly, Jeff serves on the board of the Legacy Center of Nashville, a collaboration of independent coaching resources. He is a past board member of Porter’s Call, a Nashville charity that provides free counseling for musicians and their families, and the Martha O’Bryan Center, which empowers those in poverty to transform their lives through work, education, employment, and fellowship.

Jeff and his wife, Amy, are raising their family in Brentwood where they are members of the Brentwood Baptist Church, and their children, Gracyn, Hunter, and twins Tanner and Logan, attend the Christ Presbyterian Academy. For recreation, Jeff enjoys hunting, fishing and just being outdoors.

* Membership is based on prior fiscal year production. Re-qualification is required annually.

**Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

SmartVestor is an advertising and referral service for investing professionals (“SmartVestor Pros”) operated by The Lampo Group, LLC d/b/a Ramsey Solutions (“Ramsey Solutions”). Pursuant to an arrangement between Ramsey Solutions, SageSpring Wealth Partners and your advisor, your advisor pays Ramsey Solutions a flat monthly fee to: (a) be a SmartVestor Pro, (b) advertise services through the SmartVestor website, and (c) receive client referrals in the form of an initial introduction to interested consumers who are located in your advisor’s Pros geographic region. SageSpring Wealth Partners does not endorse and are not affiliated with Ramsey Solutions, except with respect to the arrangement described above, and neither Ramsey Solutions nor its agents are officers or employees of SageSpring Wealth Partners. Further, neither Ramsey Solutions nor its agents are authorized to provide investment advice or act in any way on behalf of SageSpring Wealth Partners, except in connection with providing your contact information to your advisor.

Ramsey Solutions’ relationship and agreement is between SageSpring Wealth Partners only. Raymond James Financial Services, Inc. is not affiliated with the solicitor arrangement between Ramsey Solutions and SageSpring Wealth Partners.

Raymond James is not affiliated with any of the organizations mentioned above.