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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.

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Jeffrey T. Dobyns


President, SageSpring | Financial Advisor, RJFS 

Jeffrey T. Dobyns

President, SageSpring | Financial Advisor, RJFS

Beyond crunching numbers and investment strategies, at SageSpring, we’re about building relationships. When you encounter Founder & President of SageSpring, Jeff Dobyns, it’s easy to understand why this is at the very heart of who we are as a firm. You won’t find stuffy formalities with Jeff; instead, you can expect to find him sharing a warm smile, communicating a compelling vision, or patiently untangling life’s complex challenges with clients. He believes in truly getting to know clients, understanding their aspirations and priorities, and navigating their financial plans with a tailored, comprehensive approach. Our team members have often been caught taking notes on Jeff’s effortless relationship skills from a distance, and we admire them for striving to learn from one of the best. 

Jeff’s financial expertise and wisdom are the perfect match to his innate people skills. Jeff holds the prestigious CERTIFIED FINANCIAL PLANNERTM certification, Chartered Life Underwriter (CLU®), and Chartered Financial Consultant (ChLU®) designations, and has held executive positions with financial planning firms for more than two decades. 

His dedication extends beyond the office to the boardroom and the local community, where Jeff is passionate about giving back. He serves as Chairman of the Board of Men of Valor, a prison ministry and mentoring program. Jeff also serves on the board of Send Musicians to Prison, which shares hope, healing and restoration with the imprisoned through musicians & artists. Jeff actively supports other initiatives in the community by sitting on the board of The Signatry of Middle Tennessee and the Halftime Institute of Nashville. 

Witnessing his four children, Gracyn, Hunter, Tanner, and Logan, excel on the field is almost just as rewarding, if not more, than celebrating the victories of seeing his clients overcome obstacles and build wealth. Spending weekends boating on the lake, hiking mountain trails, and fishing with his family are the moments Jeff cherishes most. It’s this grounded perspective that reveals the true meaning of wealth for Jeff: not just numbers on a page, but the freedom to create experiences that enrich your life and the lives of those you love. When you choose the Dobyns McMillin Wealth Team, you choose more than financial expertise. You choose a partner who champions your dreams, celebrates your victories, and walks besides you on the path to achieving your unique goals.

**Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER TM, 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.