Preferred vs Common Stocks: How do they differ?

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Many people in America have some basic knowledge about the stock market. At the least, they hear news about stock prices related to some of the world’s largest entities.

At the same time, many people have very little knowledge of the availability of various classes of stock and the differences between them.

To keep things simple, the following information focuses on two types of corporate stocks, common and preferred.

We’ll define both types of stock and highlight how they differ.

Common Stock

Common stock is by far the most “common” type of stock.

It’s the kind of stock most individual investors buy and sell on the stock market through their investment accounts.

A share of common stock represents one share of ownership in the underlying corporation.

Along with that ownership stake, the common shareholder has a proportionate claim against the profits of the company.

These profits could, in turn, be paid out in the form of a declared dividend as determined by the…