Common Stock vs. Preferred Stock: What’s the Difference?

When companies raise capital through equity investments and have two main options- common stock vs preferred stock. In exchange for capital, investors receive a stake in the company’s stock and a share in profits.

Overview: Common Stock vs. Preferred Stock

Regardless of what type of stock you choose, both offer an ownership stake in a company and are an instrument to profit. Owning either of these types of stocks allows you to participate in the stock market by investing in companies.

Common Stock

When traders and investors refer to investing in stocks, they usually mean investing in common stocks, as common class shares are the most prevalent in the stock market. This is because, in most cases, preferred shares comprise only a small percentage of a company’s equity issues.

Common shares are unique in that ownership rights extend to voting rights, allowing common shareholders to drive corporate decisions. This includes the ability to elect a company’s board of directors, pass company policies, and weigh in on management issues.

Common Shares

Common Shareholders

Common shareholders are any individual or entity that are holders of common stock in any company. They enjoy all the benefits that come with common stock and are given ownership stake so long as they have ownership of the stock.

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