Preferred stock
Okay kiddo, so you know how when you buy something like candy or a toy, you get a choice of what flavor or color you want? Well, when you buy a part of a company called a stock, there are also different types to choose from, one of them being called preferred stock.
So let's say you bought a share of preferred stock in a company. This means that you get some extra benefits compared to the people who bought regular stock. Some of these benefits might include:
- Getting paid a certain amount of money (called a dividend) before the regular stockholders get anything. Basically, you get to cut in line and get your money first.
- If the company goes bankrupt and has to divide up its money and assets, the preferred stockholders get their share before the regular stockholders. This means you have a better chance of getting some of your money back if things go bad.
- Sometimes, if the company decides to sell itself or merge with another company, the preferred stockholders can get a big payout. This is like if someone offered you a whole bag of your favorite candy in exchange for your toy.
But, there's a catch. Just like how some candies or toys are more expensive than others, preferred stock usually costs more to buy than regular stock. Plus, you might not get as much growth in the value of your investment over time as you would with regular stock.
So, that's a brief explanation of preferred stock. Just remember, it's like choosing a special flavor of candy that costs more, but you get some extra perks!
So let's say you bought a share of preferred stock in a company. This means that you get some extra benefits compared to the people who bought regular stock. Some of these benefits might include:
- Getting paid a certain amount of money (called a dividend) before the regular stockholders get anything. Basically, you get to cut in line and get your money first.
- If the company goes bankrupt and has to divide up its money and assets, the preferred stockholders get their share before the regular stockholders. This means you have a better chance of getting some of your money back if things go bad.
- Sometimes, if the company decides to sell itself or merge with another company, the preferred stockholders can get a big payout. This is like if someone offered you a whole bag of your favorite candy in exchange for your toy.
But, there's a catch. Just like how some candies or toys are more expensive than others, preferred stock usually costs more to buy than regular stock. Plus, you might not get as much growth in the value of your investment over time as you would with regular stock.
So, that's a brief explanation of preferred stock. Just remember, it's like choosing a special flavor of candy that costs more, but you get some extra perks!