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July 6, 2018

There are two ways to Invest - Owning, and Loaning.

Focus on Financial Freedom (a series)

There are two ways to Invest - Owning, and Loaning.

Owning Stock is owning a piece of a company. Owning Bonds is loaning money to a company.

There is Common Stock and Preferred Stock.

Preferred Stocks - Equity

In most cases, a company must pay dividends on preferred stock before it pays dividends on common stock. This puts the preferred stockholder after the bondholder (more on bonds later) but before the common stockholder. The dividend rate on preferred stocks is usually fixed. If dividends are "cumulative", any arrears of preferred dividends must be paid before dividends can be paid on common stock. Preferred stockholders usually do not have voting rights and are sometimes convertible into common stock. This form of investment is becoming less and less attractive to individual investors.

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