Recently, I wondered why not all shareholders have the same rights in a company. It turns out there is a fundamental difference between preferred and common shares that many investors overlook.

Companies can issue different types of shares, each coming with a different set of rights. The interesting part is understanding which type best fits your profile and financial goals.

Let's start with the basics. Common shares are the most traditional type. If you buy these shares, you get voting rights at shareholder meetings, meaning you can influence important decisions like electing directors. The downside is that your dividends depend entirely on the company's performance, so they can vary greatly or even disappear during tough times. In case of bankruptcy, you are among the last in line to recover your money.

Now, preferred shares work very differently. Here, you do not have voting rights, but in exchange, you receive dividends that are usually fixed or predetermined. This is especially attractive if you're seeking regular and predictable income. Additionally, if the company encounters difficulties, you have priority over common shareholders to recover your investment.

The difference between preferred and common shares is also noticeable in liquidity and growth potential. Common shares offer greater capital appreciation potential if the company grows, but with more volatility and risk. Preferred shares, on the other hand, are more stable but with lower revaluation potential. They are sensitive to changes in interest rates, so they behave more like bonds.

There are interesting variants in both types. Among preferred shares, we have cumulative ones, where unpaid dividends accumulate for later; convertible ones, which can be transformed into common shares under certain conditions; and redeemable ones, which the company can buy back. On the common side, there are no-vote shares and multiple-class shares with different rights.

For conservative investors seeking regular income flow, preferred shares are the way to go. Especially if you're in retirement or capital preservation phase. More aggressive investors with a long-term horizon prefer common shares for their growth potential, even though they accept the volatility involved.

If you want to invest in preferred and common shares, the process is relatively simple. You need to choose a regulated broker, open an account, thoroughly analyze the company you're investing in, and execute your order. You can place market or limit orders, depending on your strategy.

What I always recommend is diversification. Mix both types of shares in your portfolio to balance risk and return. An interesting fact for context: the S&P U.S. Preferred Stock Index, which accounts for approximately 71% of the preferred stock market in the United States, has shown very different behaviors from the S&P 500 in recent years, especially in contexts of monetary policy changes.

The key is to understand your investor profile and choose the combination that aligns with your financial objectives.