Preferred stocks are, just as the name implies, preferred by savvy investors. Of course, there are still many, many beginner investors that have no idea preferred shares even exist. Beginner investors like yourself do not know just how beneficial it can be to invest in preferred stock. You could be wasting years of stock market experience by not investing in these types of stocks. If you do not already know, now is the time to learn. Find out the top benefits of investing in cheap preferred stocks in the post below. Then, consider investing in some cheap preferred shares to experience the advantages yourself.
Get Paid First
As a preferred share holder, you get paid dividends before any other investors. Who would not want to get their hands on their money before anyone else does? This first to receive payment benefit is even more advantageous after a company you are invested in has spent some time just breaking even. Once they first turn a profit again, preferred stock holders are the ones that get paid their money first. They also get paid all the profits they missed during the time of lower performance for the company. One of the biggest benefits to investing in cheap preferred stocks is getting paid dividends before other investors.
Preferred stocks offer investors higher dividends than those offered to common shareholders. Ultimately, this is one of the top reasons why you should invest in cheap preferred stocks over other alternative investments. You will be able to improve your stock market success with bigger dividends. Therefore, you will benefit from larger returns on your investments overall. Common stock holders receive lower dividends than preferred stock holders. Once you know this, it is easy to see why to invest in preferred stocks.
Best For The Worst
Preferred shares are some of the best investments to have during the worst times for a company. Should the worst happen and the company you are invested files for bankruptcy, as a preferred shareholder you are second in line to get paid. That is important. Yes, you are not first in line. The first to get their due are the bond holders. But once they are taken care of, preferred stock holders like yourself will then be paid out as well. It is only after all the preferred share owners are paid out, and if there are any assets left, that common stock holders get paid out. If you want to protect yourself from the worst thing that could happen to an investment, buying preferred stocks is a smart idea.
Preferred shares offer investors fixed dividends. This is, of course, a huge advantage to the average investor, and makes these types of holdings one of the few safe investments for seniors. They allow you to limit the investment risk you take on. When the company makes a profit, you are sure to earn the fixed dividends set forth by your buy agreement. The only time you will not earn dividends from your cheap preferred shares is when the company does not make any money in a given period. But once they start making money again, you can benefit from being back payed for those missed returns. That makes affordable preferred shares some of the least risky investment options on the market. Obviously, this is quite the advantage for a beginner investor.
Being a preferred investor grants you the privilege of being a partial owner of the company. However much preferred stock you hold, you own an equal portion of the business for those shares. That is quite an exciting prospect for beginner investors. Obviously, this is also a benefit that common shares provide as well. Preferred share owners often have a larger portion of ownership than those who own common stocks. Ultimately, becoming a partial owner of a business is one of the biggest benefits of investing in preferred shares.
Preferred shares are some of the best investment options to consider as a beginner stock investor. There are a plethora of advantages to investing in cheap preferred stocks. As a preferred shareholder, you can benefit from preferential payouts, bigger investment returns, bankruptcy protections, fixed dividends and partial company ownership. When you buy cheap preferred stocks, you can experience all these advantages for a lower price point. Make sure you consider adding these to your investment portfolio before prices go back up.