what is your insight on using preferred stocks as a primary retirement instrument at age 35 vs regular stocks?

Answer 1

great idea..... Ask total strangers how to invest your retirement money. You can never know their qualifications or motives.

Good luck with that.

Using preferred stocks as a primary vehicle for a 35 year old for retirement is......... Well the real answer is you need to take a year to read several (not 1..... several) books on retirement investing. Your idea (in my humble opinion), destroys the whole idea of "asset allocation" and is simply a huge mistake.

Answer 2

It's really hard (if not, impossible) to find mutual funds or retirement accounts that offer preferred stocks. Most (if not, all) company-sponsored retirement accounts will offer only common stocks or the mutual funds that buy them.

Ben Graham spoke of preferred stocks and convertible bonds in his book, The Intelligent Investor. Often times, these securities are issued by companies that have "less than stellar" credit-worthiness or who are desperate to raise capital and cannot do it by the conventional means of regular bonds and common stocks. Sometimes preferred stocks are a warning sign that the company is not "good enough" to issue common stocks and so it has to entice investors by offering these specialized stocks ... to compensate for the risk that the company might not be profitable.

Also remember that preferred stocks and convertible bonds are callable, meaning that the company can recall them prematurely and you then get your money back and have to find another stock to invest in. Not to mention, preferred stocks are not as easy to sell or trade as common stocks. There may also be certain rules about how long you must hold preferred stocks before you can sell them or cash them in.

Answer 3

I think you are young enough to focus on common stocks and the majority of your portfolio. Preferred stocks perform like bonds, the values don't fluctuate as much as common stocks and they pay a quarterly dividend based on the coupon rate. Over the long run, you stand to gain more capital appreciation with common stocks and that is where you'll find the greatest returns traditionally.

Answer 4

The canned answer is that when you are young, you invest in growth stocks and when you are old you change to bonds that generate income Prefered stocks are much like bonds in this respect and not what someone 35 should be getting.

Answer 5

Preferred stock as a place in a portfolio. But its a pretty conservative investment for a young person. They are part equity and part debt. Preferred stock takes priority in dividends and bankruptcy over common stock. Its different than bonds in that, unless its callable, it doesnt mature. And it has the potential for capital appreciation.

Answer 6

My insight tells me that I would not invest in one type of security as a primary retirement instrument.

I would diversify into many asset classes and types of securities.

My insight tells me that the best way to accomplish this would be to invest in mutual funds and not individual securities at all.

My insight tells me to seek the advice of a professional advisor for help in putting my retirement portfolio together.

You are a very young person and can build a wonderful retirement account but it is very important that you include asset allocation and diversification in you planning.

Answer 7

on average, I don't think preferred stocks will do as well in the long term as common stocks. Just a feeling...

P.S. My impression is that there aren't that many preferred stocks, compared to common stocks, so you wouldn't be very diversifed. And that preferred stocks act like stocks in bad times, and like bonds in good times.