Q: Thank-you for your excellent article on preferred shares providing much needed perspective on a very complex and misunderstood asset class. The comment below however could be unintentionally misleading. Other than a default situation (which can occur in any asset class), an investors capital would never fall to essentially zero. While there could be a decrease in value of these securities in certain market environments (like we are in now) there will always be an open market for them and they can be sold relatively easily to raise capital. Thanks.
"In other words, the investor could deal with the invested capital declining to essentially zero, as long as the income is maintained to meet whatever the cash flow needs are. Preferred shares can make a lot of sense when you need cash flow, but do not need the capital."
"In other words, the investor could deal with the invested capital declining to essentially zero, as long as the income is maintained to meet whatever the cash flow needs are. Preferred shares can make a lot of sense when you need cash flow, but do not need the capital."