Why I Prefer to Avoid Preferred Shares | Common Sense Investing

In the first video in this series, I told you why high-yield bonds fall short on a risk-adjusted basis, and should only be included in your portfolio in small amounts through a well-diversified low-cost ETF, if at all. If you haven’t watched it yet, click here: • Why You Should Think T...
In this episode of common sense investing I will tell you why I prefer to avoid preferred shares.
My name is Ben Felix of PWL Capital and this is Common Sense Investing. I’ll be talking about a lot more common sense investing topics in this series, so follow me here on KZbin or on LinkedIN. I want these videos to help you to make smarter investment decisions, so feel free to send me any topics that you would like me to cover.
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[@myrle-v4g]

As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?

[@LisaCulton]

Not gonna lie, I love Preferred shares.

[@stevenobinator2229]

There is enormous capital appreciation also. During the COVID crisis I put 120k into preferred shares, went up 100%

[@klaythompson663]

What if there is a set redeem rate if the issuer recalls the shares (eg. $25), but you can buy the preferred shares for less right now (like $10-15)?

[@MasterKenfucius]

The level of risk on these is established by the person investing and their selections. You can't just paint them all as risky. You mean to tell me that if Bank of America offers a preferred at 7% you wouldn't take it? Come on now. That's a sure bet in a bear market if interest rates are low. Look at the preferreds today... they're all sky-high in price because the fed keeps cutting interest rates.

[@tomspeed3354]

companies cannot stop paying dividends at their discretion for their preferred stocks. Unless they do the same for their common first.

[@tuatara80]

Ah I see. So far, I have Bank of America preferred shares. Better sell them now before BAC goes bankrupt. Thanks for the advice.

[@alr9967]

December 2023. In the summer and fall I picked up preferreds yielding 6-8%. Investment grade rated companies. Now with the Fed pivot I have capital appreciation if I chose to sell or I collect the dividends. Your hatred is misplaced.

[@Unifrog_]

Buffet has just bought shares in a gold mining company and now I hear my friends are getting interested in gold miners and gold miner funds. Any plans for a video on mining sector funds?

[@stevenobinator2229]

You're right about most preferred shares. But some perpetuals are fantastic when that devalue during shocks, such as Enbridge class A. Enbridge isnt going anywhere any time soon. AND also common share holders lose their dividend before Preferreds. BUT you are right preferreds are very complicated, and the call feature is annoying, but you can make appreciation off the callback.

[@alehunter15]

Really interesting and thorough analysis!

[@rtashpulatov]

Everything what you say here is absolutely correct and makes sense. Thank you, Rustam

[@alexm5632]

How liquid are preferred shares ETFs, can i combine investing in PFF and covered calls?

[@basseon]

Such a downer! LOL Brompton just came out with a ETF of fixed reset preferred shares SPLT. The fact that it holds pretty much all the major titles in that sector and that it's actively managed by a management firm known for their conservatism is a good think.

[@dmehus]

Very true, every time I think of buying a preferred share in a company because it's trading at a significant discount to its par value/call price, I just remind myself that the company is never, err.. perhaps I should say very rarely, for compliance reasons, under any obligation to call/redeem its preferred shares.

[@Uthur]

How about preferred shares hybrid ETFs like PFF

[@johngonzales]

Hi can I know what do you invest in? do you just invest in common stocks?

[@111kalman]

How are high yield bonds an alternative investment?

[@TestEric]

Thanks, I knew those high yields and stable prices would have been more popular if there wasn't serious risks involved. Now I understand why you wouldn't consider them as an investment.

[@jul059]

Can you do a video on p2p lending?