I've been thinking for a while about something many investors overlook: not all stocks are the same. Believe me, the difference between common and preferred shares can completely change your investment strategy.

Most people think that a stock is just a stock, period. But companies mainly issue two types, and each plays a very different role in your portfolio. Common stocks are the ones you probably know: they give you voting rights at meetings, you participate in the company's results, and they have that growth potential that attracts those looking to multiply their money. The B side: they are more volatile, dividends vary depending on how the company performs, and in case of bankruptcy, you are among the last to receive anything.

Then there are preferred stocks, which are another world. You don’t vote, but in exchange, you get more predictable and stable dividends, almost like a fixed income. In a liquidation, you have priority over common shareholders. They are ideal if what you seek is regular income without too much market noise.

The hybrid nature of preferred stocks is interesting: they combine features of debt and equity. Dividends are usually fixed or have a pre-established rate, but here’s the important part: it’s not a legal obligation for the company to return your capital as bonds do. There are variants like cumulative (where unpaid dividends accumulate), convertible (which you can exchange for common shares), and redeemable (which the company can buy back). Each has its own rules.

Now, which one to choose? It totally depends on who you are as an investor. If you are in a phase of your life where you need steady cash flow, maybe retirement or capital preservation, preferred stocks make sense. They are less volatile, more predictable. But if your horizon is long, you have the stomach for volatility, and you seek real growth, common and preferred stocks can coexist in your portfolio, but common stocks would be your main bet.

The fascinating part is comparing how they perform. Look at the S&P U.S. Preferred Stock Index: it fell 18.05% in five years, while the S&P 500 rose 57.60% in the same period. That tells you a lot about the risk and return of each. Preferred stocks suffered more due to interest rate changes, being as sensitive as bonds. Common stocks, although more volatile, gained ground with economic growth.

An intelligent strategy is diversification: mix both types according to your profile. Common stocks give you growth, preferred stocks give you stability. To start, choose a regulated broker, carefully analyze which companies interest you, decide whether to buy directly or use CFDs, and most importantly: review your investment periodically. The market changes, and your strategy must adapt.

The key is understanding that common and preferred stocks do not compete with each other, but complement each other according to your goals. It’s not one or the other, it’s knowing when to use each.