2025 marks a time of uncertainty for many investors—despite stellar performance in 2024 and a post-election bump that lasted through mid-December, the S&P 500 and the market as a whole face increasing geopolitical turmoil, a potential change to the regulatory environment for many industries alongside a new administration, haziness around the near-term future of interest rates, the ongoing impact of the AI revolution, and more. It's understandable that many investors might take a defensive approach in the new year.
Preferred stocks are an often-overlooked defensive play that can provide the potential for greater returns than bonds. These hybrid securities offer fixed-income payments akin to bonds alongside improved stability over common shares, which are dependent upon capital appreciation to make money for investors. What's more, preferreds give investors top priority for dividend payments while preserving liquidity over bond counterparts.
