Question

1) What are the two types of shareholders?
2.) What is special about each type of shareholder in terms of their rights & privileges?
3.) Your thoughts on which type YOU WOULD LIKE TO BE and why?

Answer 1

Answer 1. -

Two types of shareholders are -

(A) Common stock holder - one who gets rights to vote, this is the important characteristic of common stock holder. They get common stock or equity stock.

(B) Preferred stock - They get preferred stock. But they don't have any voting right in the company. They get dividend before common stock holder. That's why they are called preferred.

Answer 2 -

Common stock holders- The special character of common stock is voting right in the decision making in the management. Also they have right to file a class action suit against the company.

Preferred stock holders - The special trait of this stock is the holders get preference in dividend. In case of liquidation of the company, preferred stock holders get their dues before common stock holders.

Answer 3 -

As per my interest, I would prefer to be preferred stock holder considering the financial advantage perspect. Also, in terms of stability, preferred stock returns are stable as compared to common stock returns.

Common stock holders seems to be risk averse persons who are patient enough to experience extreme returns.