- When a company issues shares through a stock exchange, there is a predetermined number of shares, or stock, that is available to be bought and sold. Of the total number, some are classified as common stocks and others are classified as preferred shares. Both classifications of shareholders are entitled to profits and also suffer any declines in stock value. A preferred shareholder, however, has some more entitlements than a common stock shareholder.
- Investors earn certain privileges with common stocks. For example, if a company is considering changes to its board of directors, common shareholders often have a say on what the changes should be. Investors are allowed to vote on board replacements, and the vote usually unfolds at an annual shareholder meeting. The more shares an investor owns, the more votes she gets and the greater influence she wields.
- When General Motors Co. declared bankruptcy in 2009, common shareholders were not on the company's highest list of priorities to be repaid. According to MarketWatch, the company warned common shareholders that they would be repaid for an initial investment only after both secured and unsecured creditors were reimbursed. GM went even warned common shareholders that it was doubtful they would recover any profits. In the event of a bankruptcy, creditors and preferred shareholders take priority over common shareholders.
- Professional money managers may promote common stock investments as a way to supplement a retirement plan, according to the Los Angeles Times. Industry-leading companies with a successful history in the stock market are historically dependable. Some large companies pride themselves as having paid out regular, uninterrupted dividends for years. Investment professionals suggest that incorporating companies that pay common stock dividends into a retirement portfolio can create an additional profit stream to protect against escalating costs.
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