Should I buy ordinary or preference shares?

Fsp Invest, 09 Dec. 2013

Tags: ordinary share, preference share, ordinary shares, preference shares, should i buy ordinary or preference shares

When you buy a company’s stocks, you should consider whether you’d like to buy ordinary or preference shares.

You see, this decision will affect you financially.

Let’s take a closer look at how.

The difference between ordinary and preference shares
An ordinary share is any share that means you have ownership in a company. 
But an ordinary share doesn’t have a set dividend attached to it. 
Ordinary shares give shareholders the right to vote at shareholder meetings. 
They have a say in what happens in the company. Because they partly own the company in question. 
But… Ordinary shareholders will get their dividends payments AFTER preferred shareholders do. 
The same will happen if the company dissolves… 
Ordinary shareholders are last in line to get their money. 
Preference shares on the other hand, carry a fixed dividend but NO voting rights. 
In other words if you hold preference shares you don’t actually own part of the company!
So which should I buy—ordinary or preference shares
You see, only ordinary shares give you actual ownership of the company!
And this comes with higher expected returns, BUT also a higher risk… 
But preference shares give you more security. 
So whether you should buy ordinary or preference shares depends entirely on your situation and risk preference. 
If you’re not keen on risk, stick to preference shares

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