Comparing Perpetual Bond Common Stock & Preferred Stock

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Investment options include stocks and bonds, and there are variations of both.
Investment options include stocks and bonds, and there are variations of both. (Image: Investment image by Svitlana Boldyryeva from <a href='http://www.fotolia.com'>Fotolia.com</a>)

Stocks and bonds remain the most common and easily accessible forms of investing available to personal investors. There are options that exist for both stocks and bonds with perpetual bonds, common stocks and preferred stocks being the three most sought-after investment vehicles, because they are the most readily available, and the initial investment for all three is attainable for even the smallest of investors.

Types

A perpetual bond has no maturity date, which means the bond and the investment will remain in effect until the bond holder decides to liquidate the bond. Investors prefer perpetual bonds for their stability and longevity. Investing in a perpetual bond is a long-term form of investing.

Common stock is the stock and shares of ownership issues by a company that is public. A public company sells shares of the company to investors and in return the company reports on business performance on a routine basis. Common stock owners also receive dividends on stock shares, which is a division of business profits.

Preferred stock is similar to common stock, but the main difference is that preferred stock holders are paid dividends before common stock owners.

Features

The most noticeable feature of a perpetual bond is stability in the investment. Market fluctuations do not affect perpetual bonds once the investment has been made. The bond continues to earn the same rate of interest and return as it did when the bond was initially purchased. Low-risk investors prefer this feature.

Common and preferred stocks are moderate to high-risk investments that allow investors to be actively involved in investing. Buying, holding and selling stock is a way that investors can change their return on investment. For example, holding shares of stock in a company where the stock price does not change much offers a moderate-risk investor the ability to maintain her financial position. Higher-risk investors can move in and out of stocks quickly if they choose to.

Benefits

The primary benefit of perpetual bonds is the low risk associated with them. Perpetual bonds have a lower interest rate associated with them compared to other forms of investing; however, this is a benefit for an investor who does not want to risk his investment.

The main benefit of common and preferred stocks is the opposite of perpetual bonds. Market fluctuations and constant stock price changes provide investors with the opportunity to increase their earnings through buying stocks at a low price and selling them at a higher price. There is more involvement and understanding on the end of the investor as monitoring stock holdings and knowing when to sell is the key to recouping your initial investment plus making a profit.

Potential

The potential of perpetual bonds in terms of investment strategy is that income is routine and forever, which means that gauging income received from the bond is easy to calculate and market conditions will not affect what the investor receives as income.

Stocks, both common and preferred, have the potential to earn investors large gains in income if the stocks are selected carefully and thus bought and sold at the right time. The potential exists to make investments in stocks that provide returns on investment of 100 percent to 200 percent. Stocks, both common and preferred, issued during an IPO (initial public offering) hold the greatest potential in terms of large gains being made.

Warning

Perpetual bonds should be used as a long-term, low-risk strategy. A warning for investors is to make sure that perpetual bonds are not their only form of investment. Due to the lower rate of return, investors will maintain their current investment amount while making a slight income on revenue. Stocks, both common and preferred, should be invested in cautiously as stock prices can not only rise, but also fall.

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