Preferred stock is a hybrid security that has characteristics of both stocks and bonds. Income investors gravitate toward preferred stocks because they tend to pay large dividends, typically out-yielding common stocks as well as investment-grade corporate bonds. But buying a preferred stock is not as simple as buying a common stock. For starters, preferred stocks come in several share classes; this means lots of stock tickers. And not every brokerage is equipped to help you find and trade the exact preferred stock that you would like. For this reason, some investors choose to invest in preferred stocks via mutual funds and exchange traded funds.
If you're unfamiliar with preferred stock, we recommend that you read Harry Domash's excellent introduction to preferred stocks and Daniel Barnes's take on when to buy preferred stocks. If you've already learned the risks and rewards of preferred stock investing, this page contains popular mutual funds and ETFs that hold preferred stocks. You will not find closed-end funds listed here: Many closed-end preferred stock funds use leverage to amplify their yields (and risks). As a final word of caution, please note that actively-managed preferred stock funds tend to have above-average fees and a load to boot!
Preferred Stock ETFs
- SPDR Convertible Bond ETF (CWB)
- SPDR Wells Fargo Preferred ETF (PSK)
- PowerShares Preferred ETF (PGX)
- PowerShares Financial Preferred ETF (PGF)
- iShares U.S. Preferred Stock Index (PFF)
- Market Vectors Preferred Securities ex Financials ETF (PFXF)
- S&P International Preferred Stock Index (IPFF)
Preferred Stock Mutual Funds (Open-Ended)