While preferred stocks provide investors with an attractive source of yields, potential investors should keep in mind that the assets are vulnerable in a rising interest rate environment. If rates rise, the holdings must decline in price to elevate their yield to attractive levels. Furthermore, most preferred stocks are either perpetual or long-dated, which exposes investors to significant interest-rate risk. [Evaluating Preferred ETFs Ahead of a Rate Hike]
Like bonds, preferreds are sold at par value, or offer a fixed or floating rate of income, so prices fluctuate with interest rates.
iShares U.S. Preferred Stock ETF