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Saturday, April 9, 2011

Benefits of Preferred Stocks, Perpetual Bonds and Common Stocks

Benefits of Preferred Stocks, Perpetual Bonds and Common Stocks : Preferred stocks, perpetual bonds and common stocks are all common investment types for individual investors. Understanding the benefits of the three helps investors decide which of these types of investment suit their investing needs and style.

Preferred Stocks
Preferred stocks are shares of stock that are similar to common stock in that they give investors ownership in a company. They differ in that those holding preferred stock do not have voting rights as do owners of common stock.

One benefit of preferred stock is that dividends are paid to preferred stock owners first and then to common stock owners. Another benefit of preferred stock, in comparison to common stock, is that in the event a business files bankruptcy or goes out of business, owners of preferred stock may receive some of their investment back after assets are liquidated.

Perpetual Bonds
Typically, a bond is purchased and interest earned until the bond matures, at which point the original investment is returned. A perpetual bond, also known as a "Perp," does not mature and therefore the initial amount invested is not returned but rather the investor continuously earns interest income.

The main benefit of a perpetual bond is that they will pay the investor interest for an indefinite period of time. This is attractive to investors who seek an income source that is steady and does not fluctuate with other market changes and conditions.

Common Stock
Common stock gives those who buy shares ownership in the company. Common stock owners are also given voting rights for that company, which means they can be involved with how the business is run.

One of the benefits or common stock, mainly when compared to preferred stock, is the ability to have voting rights when the board of directors makes motions to alter business. This is a benefit for active investors with large holdings in a company because they can have a say in how the company is run and what future plans are.

Another benefit of common stock is that more shares of common stock are traded, which means that there is opportunity for common stock to increase in value as the business does better and trading volumes rise. Common stock owners can sell their shares on the open market when stock prices rise above what they initially paid for the stock to make a profit.

Common stock owners also have the benefit of receiving dividend payments from the profits of the company, the same way preferred stock owners do. Common stock dividends are calculated and paid after preferred stock dividends are given. For the latest updates PRESS CTR + D or visit Stock Market news Today

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