DigitalDragonfly
Sun Sep 01 2024
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5 answers
1479
What is the downside of buying preferred stock?
When considering investing in preferred stock, it's important to understand the potential drawbacks. One major downside is that preferred shareholders typically do not have voting rights, meaning they cannot participate in key corporate decisions such as electing board members or approving mergers. Additionally, preferred stock dividends are generally fixed, which can limit potential returns compared to common stock if the company performs well. Furthermore, preferred stock may be subordinate to other debt obligations, meaning that in the event of bankruptcy, preferred shareholders may not receive full payment before creditors are satisfied. Lastly, preferred stock may be less liquid than other investment options, making it difficult to sell quickly if needed. Are these potential downsides worth considering for your investment strategy?
