investing in your future
What Is a Stock?
When you buy a stock, you buy ownership in a company. This type of investment often involves a lot more risk than a bond. Stocks in public companies are either “common” or “preferred.” How do these two types of stock differ?
- Common stocks can be purchased by anyone, but preferred stocks are only available to company employees.
- Common stocks give stockholders voting rights; preferred stocks do not.
- Banks sell common stocks, while investment firms sell preferred stocks.
“B” is correct. If you own preferred stock, you don’t have voting rights, but you do have a greater claim to the company’s assets and earnings. When the company pays out dividends, you receive yours first -- before the common stockholders do. If the company goes under, you may even receive some compensation when its assets are liquidated. Common stockholders are only reimbursed after everyone else has been paid.