After knowing about the meaning of stocks, now we will discuss the types of stocks. It turns out that not all stocks are the same. There are two types of stock in the Stock Market, namely Common Stock and Preferred Stock. What are the differences between the two types of stocks?
stocks that are commonly known to the public are ordinary stocks, but actually, there are two types of stocks, namely:
Ordinary stocks are stocks that place the last owner on the distribution of dividends and rights to the company’s assets if the company is liquidated. This is because the owners of common stock do not have special rights. Owners of common stock will also not receive dividend payments as long as the company does not make a profit. Each stockholder has voting rights in the General Meeting of stockholders / GMS with the provision of one stock one vote. Common stockholders have limited liability for claims of other parties in the proportion of their stocks and have the right to transfer ownership of their stocks to others.
Preferred stock is a stock that has the characteristics of a combination of bonds and common stock because it can generate fixed income (such as bond interest). This is due to getting the right to distribute dividends on a regular basis. There are 3 characteristics of preferred stock that make it similar to bonds:
a. There are claims on previous profits and assets
b. A fixed dividend for the life of the stock
c. Has redemption rights and can be exchanged for common stock.
The advantage of preferred stock is that it is safer than common stock. Because the preferred stock has the right to claim the company’s assets and distribute dividends first. However, preferred stock has the disadvantage that it is difficult to trade like ordinary stocks, because of the small number.