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Bonds or Preferred Stocks
The financial mechanisms of bonds and preferred stocks are often similar in the meaning that both are money borrowed by institutions (both private as well as state owned), used in investment projects and then paid back to the holders. Differences however exist and they materialize in the fixed rate of the bond or the payment priority of the preferred stock (Investopedia, 2009). The decision to invest in either of them depends on the personal characteristics of each investor. I for one would opt for bonds for the simple argument that, despite their lower level of return, they offer more security- a highly important element for an investor with a high degree of aversion to risk.
The Ford Motors Company has been present in the national and international markets for more than a century, but the past recent years have faced it with numerous financial challenges, which took a toll on the organization's stock as well. The Ford bond is being currently traded for fluctuating values, going as high as $107 or as low as $57. Maturity dates also vary and encompass years from 2021 (the price of this bond is of $61.50) to 2097 -- the price of this bond is of $58 (Yahoo Finance, 2009).
Despite their past low popularity, the investors are now beginning to seek more vividly the Ford preferred stock (F-PF) and this is generally explained by the fact that the popularity of the common stock has suffered demises. The company officials have decided to allow owners of common stocks to exchange them with preferred stocks and vice versa, in order to increase investor satisfaction. The preferred stock is being traded at a value of $38.86. Preferred stocks are among the riskiest investments and the specialized advice is that they be kept for long periods of time, but in small amounts. Additionally, it is necessary to diversify the portfolio and the preferred stock should not make up more than one percent (Neubert, 2007).
References:
Neubert, D., 2007, Ford Preferred (F-PS): Used Only with Diversification, The Panelist, http://thepanelist.com/Neubert%27s_Trades/Neuberts_Trades/_20070805502/last accessed on July 8, 2009
2009, Bond Screener at Yahoo Finance, http://reports.finance.yahoo.com/z1?is=ford last accessed on July 8, 2009
2009, Investopedia, http://www.investopedia.com last accessed on July 8, 2009
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