Preferred Stock ETF

AAA

DEFINITION of 'Preferred Stock ETF'

An exchange-traded fund that either tracks a preferred stock index or invests primarily in preferred shares. A preferred stock ETF appeals to investors who desire above-average yields, especially in a low interest rate environment. The advantages of a preferred stock ETF include diversification and low management fees.

INVESTOPEDIA EXPLAINS 'Preferred Stock ETF'

Preferred shares are hybrid instruments that have both debt and equity features. Preferred shareholders rank ahead of common shareholders in terms of dividends and claims on assets, but their claims are subordinate to those of debt-holders. Preferred share dividends are also taxed favorably in a number of jurisdictions. Unlike common shares, preferred shares have little participation in the upside potential of the issuer, which means that preferred stock ETFs are likely to significantly underperform equity ETFs when stock markets are rising strongly.

RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Participating Convertible Preferred ...

    An equity holding that gives investors the right to claim excess ...
  3. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  4. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  5. Preferred Dividend

    A dividend that is accrued and paid on a company's preferred ...
  6. Participating Preferred Stock

    A type of preferred stock that gives the holder the right to ...
RELATED FAQS
  1. What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Full Answer >>
  2. Why do some preferred stocks have a higher yield than common stocks?

    Before we answer this question, let's just take a quick review of what a stock's yield is actually measuring. The yield is ... Read Full Answer >>
  3. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  2. Mutual Funds & ETFs

    4 Ways To Use ETFs In Your Portfolio

    To take full advantage of these vehicles, you need to know how they can fulfill certain strategies.
  3. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  4. Options & Futures

    The Benefits Of ETF Investing

    Exchange-traded funds provide unique opportunities for investors. Find out how.
  5. Chart Advisor

    Looking To The Mega Caps For Strength

    Increased volatility is making it difficult to find areas of strength in the market. Even utilities are breaking below key support levels. The mega caps could be the answer.
  6. Stock Analysis

    Invest Here Now: The Hottest Sectors of 2014-15

    These 10 industries have made investors a lot of money over the past year. Is there still room to run?
  7. Mutual Funds & ETFs

    Why Mutual Funds are Still Better than ETFs

    Mutual funds might not be as sexy as they used to be, but they offer some advantages over ETFs – especially for certain types of investors.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Silver Trust

    Learn about the iShares Silver Trust, an exchange-traded fund that invests primarily in silver and is affected by risks unique to commodities.
  9. Stock Analysis

    ETF Analysis: PowerShares QQQ Trust

    Learn more about one of the most popular and widely traded exchange-traded funds in the world: Invesco PowerShares QQQ Trust (QQQ) ETF.
  10. Mutual Funds & ETFs

    Top 3 ETFS for Investing in Germany

    Discover why Germany is considered an economic powerhouse in the eurozone, and learn about the three ETFs that provide investors exposure to Germany’s economy.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!