Novice
Common vs preferred
Two equity flavors: voting/upside vs priority/dividends — concepts only. Education only — not a recommendation to buy, sell, or hold anything.
Common stock, briefly
- Represents residual ownership after creditors and preferred holders.
- Often carries voting rights (not always equal across share classes).
- Upside can be large — and so can downside to zero.
Preferred stock, briefly
- Usually prioritizes dividends over common; terms live in the prospectus.
- Often limited or no voting rights.
- “Preferred” is a legal priority label — not a quality grade or safety seal.
Where they sit in the capital stack
Rough order in a bad outcome (simplified): secured creditors → unsecured creditors → preferred → common. Reality is document-driven. Literacy means reading seniority language, not memorizing slogans.
Share classes
- Class A / B / etc. can alter votes and economics.
- Always ask: who controls? who gets residual cash flows?
Practice tip: Compare ownership ideas on Stock vs ETF vs crypto, then practice fake equity tickets on /mock/.