I just noticed that many people are still confused between preferred shares and common shares, even though the differences are very important when it comes to investment money.

Alright, let me explain in a simple way. Preferred shares are investment tools that combine bonds and common shares into one. But in practice, they function more like creditors than business owners.

What's the key difference? Here it is. If the company goes bankrupt, preferred shareholders will get their money back before common shareholders. And dividends? They also receive them first. Usually, they are fixed at 5-7% of the par value, not fluctuating with the company's profits.

But be careful: preferred shares do not have voting rights at shareholder meetings. So, you don't have the power to control the company's direction. Compare this with common shares: they offer unlimited profit potential, with prices possibly soaring ten or even a hundred times if the company grows well. But the risk comes with it—if the company goes bankrupt, your investment could become zero.

The types of preferred shares can be complex. There are cumulative dividends (Cumulative), meaning if the company skips a dividend year, the unpaid dividends are accumulated and paid later. Non-cumulative shares (Non-cumulative) do not accumulate—if dividends are missed, they are lost forever. There are also convertible preferred shares, which can be converted into common shares—giving you a way to play the profit and price game. And callable preferred shares, which the company can buy back—be cautious because if market interest rates fall, the company might call back high-dividend preferred shares and reissue at lower rates.

Why do companies prefer issuing preferred shares? Because it helps maintain control. Preferred shareholders have no voting rights. Another reason is that, on the books, they are counted as equity, not debt, which improves debt-to-equity ratios.

Now, the big question: who should choose preferred shares? If you want steady dividends, don’t want to monitor your investments constantly, and are risk-averse, preferred shares are a good choice. But if you want your money to grow over 5-10 years, common shares are more suitable.

However, many people don’t know that preferred shares in the Thai market have liquidity issues. For example, look at KTB-P—some days, trading volume is almost zero. If you buy a large amount and need to sell quickly, you might have to heavily discount or even be unable to sell.

A notable case is SCB. They once made a tender offer to exchange existing SCB shares for SCBx. Preferred shareholders (SCB-P) had the opportunity to convert, but those who refused or missed the news saw their original SCB shares delisted from the market. They became over-the-counter shares that are very hard to trade. This is an important lesson: preferred shares may not last forever.

Other risks to watch out for include: preferred share prices move inversely with interest rates. If market rates rise, their prices fall because investors sell them to buy bonds with better yields. There’s also the risk of being called back when interest rates drop, and liquidity risks, which are quite high in the Thai market.

In summary, preferred shares are tools for those who want to preserve wealth, not create it. If you are retired or need cash flow, they might be suitable—but you must study the conditions carefully, choose strong companies, and most importantly, check liquidity to ensure you can sell when needed.