Preferred shares are popular with Canadians because of their high yields (compared with bonds and GICs) and favourable tax treatment. While they are often held by large institutions, preferred shares are also a favourite of retail investors and advisors. While preferred shares can be appropriate in a diversified portfolio, their benefits come at the cost of higher risk, less liquidity and more complexity than traditional fixed income investments.

 

This paper reviews the risks and rewards of preferred shares and offers suggestions for Canadians who are considering adding this asset class to their portfolios.

Contributors