If you're thinking about investing in stocks, there's something you probably didn't know: not all stocks are the same. This is more important than it seems because choosing poorly can completely change your investment strategy.

Companies basically issue two categories: common stocks and preferred stocks. But beware, because although they sound similar, they work in very different ways. Understanding what common and preferred stocks are is the first step to building a portfolio that fits what you're really looking for.

Let's start with common stocks. They are the most typical, the ones most people know. They give you voting rights at shareholder meetings, meaning you have a voice in important decisions like electing directors. The dividend you receive varies depending on how well the company performs: in good years, you earn more; in bad years, you might get nothing. The growth potential is high, but so is the risk. If the company goes bankrupt, you wait your turn after creditors and preferred shareholders.

Now, preferred stocks are a different animal. Here, you don't have voting rights, so you don't influence corporate decisions. But in exchange, you receive fixed or predictable dividends, often higher than those of common stocks. The interesting part is that if the company faces financial problems, you have priority to collect those dividends. In case of liquidation, you also stand ahead of common shareholders. It's like a middle ground between a bond and a stock.

There are variants of both. With preferred stocks, some are cumulative, where unpaid dividends accumulate for later payment, and others are convertible, which you can transform into common shares under certain conditions. With common stocks, some companies issue multiple classes with different voting rights.

So, which one to choose? It depends entirely on your profile. If you're young, have time, and can tolerate volatility, common stocks are your game. The potential for your money to grow significantly is real, especially if you choose companies with good performance. But if you're closer to retirement or simply looking for a steady, predictable income stream, preferred stocks fit better. Fewer surprises, more stability.

An interesting fact: if you compare how common and preferred stocks behave over time, you'll see clear differences. The S&P U.S. Preferred Stock Index fell 18.05% over five years, while the S&P 500 rose 57.60% in the same period. This shows how they react differently to changes in interest rates and market conditions.

To invest, the process is quite straightforward. First, choose a regulated and trustworthy broker. Open your account, clearly define which strategy you'll follow. Analyze the company: its numbers, its sector, its financial health. Then execute your order at the current price or set a specific one. Some brokers also offer CFDs on these stocks if you prefer not to hold them physically in your portfolio.

My recommendation: don't put all your eggs in one basket. Mix common stocks for growth with preferred stocks for stability. Review your portfolio regularly and adjust as the market evolves. That’s what long-term investors do.

In the end, knowing what common and preferred stocks are and how they work gives you a real advantage. It's not just theory: it's the difference between a portfolio that adapts to your real goals and one that simply drifts aimlessly.