Recently, I was asked a question that made me think: are all stocks truly the same? The answer is no, and that changes a lot if you invest.

Most people only know one type of stock, but in reality, there are significant differences between common and preferred shares. And believe me, knowing this can save your investment strategy.

Let's start with the basics. Common stocks are the ones you probably know: they give you voting rights in company decisions, you receive dividends but they vary depending on how well the company does, and if everything goes south, you're last in line to recover your money. They are the most volatile, but also have the greatest growth potential.

Then there are preferred stocks. These are different. They don't give you voting rights (so forget about influencing decisions), but in exchange, you get more stable and predictable dividends. In case of bankruptcy, you have priority over common shareholders. It's like trading huge profit potential for security and steady cash flow.

Preferred stocks come in various flavors: some accumulate unpaid dividends for later, others are convertible (you can transform them into common shares under certain conditions), and some can be repurchased by the company. It all depends on what kind of stability you're seeking.

Now, who should choose each type? If you're young, have a long investment horizon, and can withstand turbulence, common stocks are probably your best bet. The growth potential is real. But if you're close to retirement, need predictable income, or are simply more conservative, preferred stocks will give you more peace of mind.

One interesting thing I saw when comparing data: the S&P U.S. Preferred Stock Index fell 18.05% in five years, while the S&P 500 rose 57.60%. That clearly shows the difference in behavior. Common stocks rise more in good times but fall more in bad times. Preferred stocks are more stable but more predictable.

If you want to invest in either of these two types, the process is quite straightforward. You need a regulated broker, open an account, carefully analyze the company to define your strategy, and place the order. Some brokers also allow you to trade CFDs on these stocks if you prefer not to hold them directly.

My personal recommendation: it's not a "one or the other." Mix both. Hold common stocks for long-term growth, preferred stocks for stability, and review your portfolio periodically. Diversification is what really works.

The key is to understand what you need at each stage of your life as an investor. Common stocks are for those seeking gains and willing to wait. Preferred stocks are for those who need cash flow and sleep better without extreme volatility.