I just reviewed a topic that many wonder about when they start investing: do all stocks really look the same? The answer is no. It turns out that companies can issue different types of shares, and each has its own rules. Today I want to delve into this because understanding the difference between common and preferred shares is fundamental if you want to make smart decisions.

Basically, when a company issues shares, it usually offers two main options: common shares and preferred shares. Each works differently and appeals to investors with different profiles.

Let's start with common shares. They are the most common type you'll find on any stock exchange. The interesting thing is that they give you voting rights at shareholder meetings, meaning you have a voice in important decisions like electing directors. The dividends you receive will depend on the company's performance, so they can be high in good years or low in bad years. If the company goes bankrupt, you'll only receive compensation after paying creditors and preferred shareholders. The growth potential is higher, but there is also more volatility.

Preferred shares work differently. They do not give you voting rights, but they offer something more valuable for certain investors: fixed or predictable dividends. Think of it as a mix between a stock and a bond. Although you don't control the company, you have priority in receiving your dividends before common shareholders, and in case of liquidation, you also have preference. There are interesting variants: some accumulate unpaid dividends, others are convertible (you can exchange them for common shares), and some are redeemable (the company can buy them back).

Now, which is better? It depends entirely on your profile. If you're looking for long-term growth and can tolerate volatility, common shares are your option. You have real potential for capital appreciation and control over your investments. But if you prefer steady, predictable income—especially if you're close to retirement—preferred shares offer that stability.

One thing I noticed comparing indices: the S&P U.S. Preferred Stock Index fell 18.05% over five years, while the S&P 500 rose 57.60%. This clearly shows how these two types of investments behave differently in response to interest rate changes and market conditions.

If you want to invest in common and preferred shares, the process is simple: find a regulated broker, open your account, thoroughly analyze the company (numbers, sector, prospects), and place your order. You can place market orders (current price) or limit orders (your price). There is also the option to trade CFDs if your broker offers it.

My recommendation: diversify. Mix common and preferred shares according to your situation. If you're young and tolerate risk, lean more toward common shares. If you're seeking steady income flow, prefer preferred shares. And regularly review your portfolio to adjust your strategy when necessary.