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Preferred stocks are sometimes referred to as “hybrids” because they share characteristics common to both stocks and bonds.  A preferred stock trades on an exchange, just like a common stock.  But it also trades around a par value, like a bond.  One of the benefits of owning preferred stocks is that they usually have a higher dividend payment than the common shares.  This is good for investors who want a greater level of income than can be found in other types of investments.  Preferred stocks also help diversify a client’s portfolio.  Studies have shown that adding preferred stocks to a portfolio will result in less risk being taken than having a portfolio comprised entirely of common stocks.  But the downside of owning preferred stocks is that preferred stocks do carry some level of risk.  While they are less risky than common stocks they are riskier than US Government bonds.  The bottom line is that by owning preferred stocks, investors can receive a higher level of income with less risk compared to other investment alternatives.