Recently, I started researching this topic thoroughly because I was confused about the types of stocks I could buy. It turns out that owning common stocks is not the same as owning preferred stocks, and that can significantly change your strategy as an investor.

Let's start with the basics. When a company goes public, it can issue different classes of shares, and this is where many get lost. The two main types are common and preferred, and although they sound similar, they work in very different ways.

Common stocks are the most well-known. They give you voting rights at shareholder meetings, so you have a voice in important decisions. The downside is that dividends vary depending on how well the company performs. During times of crisis, there may be no dividends or very low ones. But the growth potential is interesting if the company does well.

Now, preferred and common shareholders have completely different dynamics. With preferred stocks, you sacrifice voting rights but gain stability. Dividends are usually fixed or have a predetermined rate, which is attractive if you're looking for predictable income. Additionally, if the company goes bankrupt, preferred shareholders have priority to recover their investment before common shareholders.

What's interesting is that there are variants within each type. There are cumulative preferred stocks (unpaid dividends accumulate), convertible (can be transformed into common shares), redeemable (the company can buy them back). With common stocks, something similar happens: some companies issue non-voting shares, or have multiple class structures where different shares grant different rights.

From a liquidity perspective, common stocks are usually easier to sell because there is higher demand. Preferred stocks can be harder to move, especially if they have redemption clauses or special restrictions.

When it comes to risk, here is the key difference. Common stocks are more volatile but with greater appreciation potential. Preferred stocks are more conservative, with more predictable returns but less excitement. Preferred and common shareholders have very different risk profiles.

To choose between one or the other depends on where you are in your financial life. If you're young and have time to recover from market dips, common stocks might be your option. If you're already retired or seeking regular income, preferred stocks make more sense. Many smart investors combine both to diversify.

Regarding how to invest, the process is quite straightforward: find a regulated broker, open an account, carefully analyze the company to define your strategy, and execute your order. Some brokers also allow trading CFDs on these stocks without needing to own them directly.

A curious fact: if you compare the US preferred stock index with the S&P 500, you can clearly see how they react differently to economic changes. The preferred stock index fell significantly over a five-year period while the S&P 500 rose substantially, reflecting how these instruments respond differently to monetary policy.

My personal advice: don't think that one is better than the other. Mix both types according to your risk tolerance and goals. Review your portfolio regularly and adjust if conditions change. The real advantage lies in understanding well what kind of shareholder you are and what you truly need from your investments.