Every Wednesday, we publish our “Investor Toolkit” investing advice series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing. Each Investor Toolkit update gives you a fundamental piece of investing advice and shows you how you can put it into practice right away.

Tip of the week: “Sometimes it pays to pay a little extra and get a vote.”

Some Canadian companies, such as Bombardier and Teck Resources, have two classes of common shares: voting and non-voting (or multiple voting and subordinate voting).

The two classes get the same or almost the same dividend. The main difference: holders of voting or multiple-voting shares control the company. Non-voting and subordinate-voting shares only have meaningful voting rights in extraordinary circumstances.

Companies with multiple share classes often have a so-called “coattails provision.” This provision aims to ensure that both share classes have equal rights in the event of a takeover. So, if you hold non-voting or subordinate-voting shares, you won’t miss out on a takeover bid.

Non-voting shares trade more actively than the voters, usually at a slight price discount. But successful investors focus on finding investments that you can stick with indefinitely, so they put a lower priority on liquidity. They may pay a little more for the voting shares. Here’s our investing advice on which class to buy:

1. Always choose voters if they trade at a premium of 5% or less over non-voters. Chances are you’ll get the premium back when you sell, and the voting stock won’t go below the non-voting. But the voting-stock premium could balloon to 20% or more in a takeover.

Invest in your Financial Future for FREE Learn everything you need to know in '9 Secrets of Successful Wealth Management' for FREE from The Successful Investor. Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.  I consent to receiving information from The Successful Investor via email. I understand I can unsubscribe from these updates at any time.

2. Choose non-voting shares if the voters trade at a premium of 10% or more. If takeover interest wanes, the premium may shrink to 5% or less. If there is a takeover, the coattails provision may apply. If so, the premium on the voting shares should evaporate.
3. If the voting-stock premium is between 5% and 10%, base your decision on your own temperament and judgment. If you’re an aggressive investor and a takeover bid seems likely, you may prefer the voting stock.

Whenever premiums exceed 5%, however, many conservative investors routinely choose the cheaper non-voters. They see themselves as investors, not gamblers.

Next Wednesday, December 29, 2011, Investor Toolkit will give you our investing advice on how to diversify your portfolio.

If you’re looking for authoritative investing advice, or fundamental analysis of stocks you’re considering buying (or selling), you should join my Inner Circle service. When you do, you always get clear, concise investment advice that’s 100% independent, and untainted by commissions or other undisclosed influences. I swear to it. Click here to learn more.