Preferred Stock

Preferred stock mutual funds and ETFs invest the majority of their assets... Preferred stock mutual funds and ETFs invest the majority of their assets in preferred shares and perpetual bonds. Preferred shares are equity investments that differ from common shares. Preferred shareholders receive dividends before common shareholders are paid. In addition, preferred shareholders rank higher than common shareholders in any bankruptcy proceeding. As a result, preferred shareholders tend to enjoy stable cash flow potential compared to common shareholders. On the other hand, preferred shareholders typically lack voting rights, and thus a say on the direction of a company. Another potential downside to owning preferred shares is that, because their dividend payments are fixed, they do not tend to appreciate as much as common shares. Preferred stock mutual funds and ETFs are reasonably conservative investments. However, they do come with some risk, because preferred shares behave in a way similar to long-duration bonds. As a result, a sharp rise in long-term interest rates can meaningfully depress the value of these securities. Last Updated: 11/27/2024 View more View less

Preferred stock mutual funds and ETFs invest the majority of their assets in preferred shares and perpetual bonds. Preferred shares are equity investments that differ from common shares. Preferred shareholders receive dividends before... Preferred stock mutual funds and ETFs invest the majority of their assets in preferred shares and perpetual bonds. Preferred shares are equity investments that differ from common shares. Preferred shareholders receive dividends before common shareholders are paid. In addition, preferred shareholders rank higher than common shareholders in any bankruptcy proceeding. As a result, preferred shareholders tend to enjoy stable cash flow potential compared to common shareholders. On the other hand, preferred shareholders typically lack voting rights, and thus a say on the direction of a company. Another potential downside to owning preferred shares is that, because their dividend payments are fixed, they do not tend to appreciate as much as common shares. Preferred stock mutual funds and ETFs are reasonably conservative investments. However, they do come with some risk, because preferred shares behave in a way similar to long-duration bonds. As a result, a sharp rise in long-term interest rates can meaningfully depress the value of these securities. Last Updated: 11/27/2024 View more View less