Final answer:
Preferred stock is an investment that has elements of both bonds and common stock, offering fixed dividends without voting rights. It can be purchased on investment markets and contributes to diversification in a financial portfolio, which can also be achieved through mutual funds.
Step-by-step explanation:
Preferred stock is a type of investment that has characteristics of both bonds and common stock. This financial tool provides a fixed dividend, similar to the interest payment from bonds, and represents an ownership stake in a company, similar to common stock. However, unlike common stock, preferred stock typically does not come with voting rights. People can purchase preferred stocks and other financial securities like bonds and common stock in investment markets. Diversifying your portfolio is crucial as it helps spread risk across different types of investments, which can lead to a more stable return over time. Mutual funds offer another way to save, as they are professionally managed and automatically diversified into different assets such as stocks and bonds.