Welcome to the Stay Wealthy Podcast.

I'm your host, Taylor Schulte, and today I'm talking about preferred stocks after receiving a great question from one of our listeners, Gene, in Kansas, earlier this year.

Specifically, Gene was looking for a way to get better returns on bonds and cash and asked if preferred stocks would be appropriate.

In addition to answering Gene's question, I'm also breaking down what preferred stocks are,

why you would invest in them, and little known risks to watch out for.

So if you're ready to learn all about preferred stocks in plain English, today's episode is for you. From the links and resources

mentioned, head over to you staywealthy.com forward slash 130. When a company becomes insolvent

and can't pay its obligations, they go through a process known as liquidation. And when a company is liquidated

here in the United States, its creditors, i.e., the people they owe money to, are paid in a particular

order. Keeping it simple for today, bondholders are paid first, then preferred stockholders,

and then common stockholders. We're of course going to be talking a lot more about preferred stockholders today,

but really quick, common stockholders are what most of you are familiar with.

Common stockholders are those investors who simply buy and own stock of a company.

The stocks and ticker symbols talked about all day on CMBC. When you buy shares

of a common stock like Apple or Google or Facebook, let's say, you have a small slice of ownership

in that company. And while you are an owner, you're actually at the bottom of the list to receive

whatever assets remain during a liquidation

event.

And that's one of the benefits often highlighted by preferred stock advocates.

Yes, they get paid after bondholders, but their claim on assets is greater than common

stockholders.

They also have priority over common stockholders when it comes to distributions like dividends.

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