Now here is a type of stock that most Indian retail investors have never encountered, but it is worth knowing about.

Preferred stock is a hybrid. It sits somewhere between a bond and a common share, which is why it is sometimes called a hybrid security.

Preferred stockholders receive dividends before common shareholders. They also have priority over common shareholders if the company is wound up. In those two senses, preferred stock behaves a bit like a bond. It has a more predictable income stream and a higher claim in bankruptcy.

What preferred stockholders typically do not get is a vote. Most preferred stock carries no voting rights at all.

This trade-off matters. 

In good times, common shareholders participate fully in the upside as the company grows. Preferred shareholders receive their fixed dividend and not much more. In bad times, preferred shareholders have a safer position. Common shareholders may lose everything.

You will rarely encounter preferred stock directly as an individual investor.

 Preferred issuances are mostly held by institutions. But there are preferred share ETFs if you want exposure to this income-oriented part of the market, and some companies like Apple, Bank of America, and Wells Fargo have significant preferred stock outstanding that you will see mentioned in their capital structures.