I've noticed that many people approaching the stock market don't really understand the difference between common and preferred shares. And honestly, it's something we should all be clear about before investing money anywhere.

The basics are this: not all shares are the same. A company can issue different types, each with different rights. Most people only think about common shares, but preferred shares exist, and the difference is quite significant.

Common shares are what most people know. They give you voting rights at meetings, allowing you to influence company decisions. The dividends you receive depend on how well the company performs, so they can be high or low. The downside is that in case of bankruptcy, you're among the last to receive anything. But they have high liquidity, trade easily, and the growth potential is real if the company grows.

Preferred shares work differently. They don't give you voting rights, but you have priority on dividends. They are usually fixed or have a pre-established rate, giving you more predictability. In liquidation, you are ahead of common shareholders. The problem is that the growth potential is limited, they are less liquid, and they tend to be sensitive to interest rate changes.

There are variants of both. Among preferred shares, there are cumulative ones (unpaid dividends accumulate), convertible (can be converted into common shares under certain conditions), redeemable (the company can buy them back). In common shares, there are also classifications, including some without voting rights or with multiple classes.

Choosing between common and preferred shares depends a lot on your profile. If you're looking for long-term growth and can tolerate volatility, common shares are your option. If you prefer stable income and risk reduction, preferred shares make sense. Many experienced investors mix both to balance.

Looking at historical performance, the S&P U.S. Preferred Stock Index fell 18.05% over a five-year period, while the S&P 500 rose 57.60% in the same span. That clearly shows how differently these two types of investment behave when market conditions change.

To invest, the process is simple: choose a regulated broker, open an account, define your strategy based on the company you're interested in, and place the order. You can place market or limit orders. Some brokers also offer CFDs on these shares if you don't want to buy them directly.

My recommendation: diversify. Mix common and preferred shares according to your age and goals. If you're in the early stages of your financial life, you can take more risk with common shares. If you're close to retirement or want to preserve capital, preferred shares are more stable. And periodically review your portfolio; the market changes, and your strategy should adapt too.