Common vs. Preferred Quick, answer this: What kind of stock do most investors prefer -- common or preferred? Judging from its name, you might think it's the latter. But it's not.				> Home > Glossary > Support
		Most stock that is issued by corporations and traded by individuals is classified as common stock. Individual investors tend to prefer common stock because it has more opportunity for increasing in value than preferred stock.
		Here's why: Preferred stock generally pays a fixed dividend, either as a dollar amount or a percentage of par value (the stated value of the security appearing on the certificate). If the stock's value goes down, the dividend remains the same, which is great because it dampens your loss. But, if the stock rises, the dividend will likewise remain the same, which is not so great on a percentage basis. The result is that preferred stock actually trades much like long-term corporate bonds.
		The reason "preferred" stock is called "preferred" has to do with the order in which dividends and other payments are made. If there is not enough profit to go around to all shareholders, preferred stockholders will receive their dividends first. If the company goes bankrupt and liquidates its holdings, preferred stockholders will be paid before those with common stock (but after creditors).
		Some companies, particularly older and more established ones as well as family companies, divide their preferred and common stock into classes (A, B, C, etc.). These may have a different number of votes per share, or dividend preferences, and they will probably trade at different prices.
		How much can you lose owning a stock?
		With either common or preferred stock, you own part of the corporation and you are entitled to share in its profits. However, you are not guaranteed dividends or capital gains, and if the company performs badly you may not make money. In fact, if the company goes bankrupt you could lose all the money you invested. However, you can never lose more than you invested, because as a shareholder you are not responsible for the company's debts.
		Although there is a chance you could lose the total amount you invested, there are advantages to being a stockholder. One is that you are generally entitled to vote at shareholders' meetings. You may be able to influence management if you think the corporation is off track. Preferred stock does not always carry voting rights, and some common stock is non-voting as well.
		The second advantage is that you can be eligible for subscription privileges (possibly at preferential rates) if the company decides to issue new shares.

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