How to Buy Preferred Stock

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Preferred stock offers the yields of bonds in a structure similar to stocks. Investors are attracted to the stability of these corporate stocks while enjoying higher returns. To invest in preferred stock, you must first understand how preferred stocks work, the various types and where to purchase these investments.

Preferred Stock Information

Like common stock, preferred stocks represent ownership in a company, but like a bond, they provide regular interest payments. They have their own stock symbols, but multiple symbols are used to represent a company's various kinds of preferred stock, so they can be trickier to follow. Knowing the different types of preferred stocks and the pros and cons of each can help you determine which you should add to your portfolio. The main types are traditional, convertible and trust. Traditional preferred stocks are straightforward. Convertible preferred stocks offer an income stream but can be converted to common stock and benefit from a rise in the company's value. Trust preferred stocks operate like bonds that have been carved into smaller investments; they offer the safety of bonds but the liquidity of stocks.

Purchasing Process

Research the pros and cons of each of the preferred stock types to understand which aligns with your financial goals and needs. Like with other forms of stock, you should research past performance data as well as analysts' predictions, using a local or national newspaper, financial news website, or financial broadcast news channel to stay on top of the company's activities, industry trends and how they both affect the company's stock price. Talk to your broker or set up an account with an online brokerage or trading site. Some brokerage companies will also have a selection of preferred stocks they have created for their customers. Some firms will be willing to obtain a preferred stock for you even if they do not offer it. If not, you can either select from their portfolio or you can expand to another brokerage company, whether online or in person.

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