Many corporations either use bonds or preferred shares for raising money. Both types of investments are similar in certain aspects however there are a few key differences that set them apart. The type of security they represent is one of the biggest. For example, if a shareholder invests in preferred shares, the stock will be considered as an equity instrument. This means that the shareholder will be entitled to a partial ownership of the company instead of a creditor. On the other hand, investing in a bond would mean that the shareholder is a creditor of the company.