Stocks and bonds are two fundamental types of investment instruments, but they serve different purposes and come with distinct characteristics.
Stocks represent ownership in a company. When you
Stocks and bonds are two fundamental types of investment instruments, but they serve different purposes and come with distinct characteristics.
Stocks represent ownership in a company. When you buy a stock, you purchase a share of that company, which means you have a claim on its assets and earnings. Stocks can provide returns through capital appreciation (if the stock price increases) and dividends (a portion of the company's profits distributed to shareholders). However, they come with higher risk, as stock prices can be volatile and are influenced by market conditions and company performance.
Bonds, on the other hand, are debt instruments. When you buy a bond, you are essentially lending money to the issuer (which could be a corporation or government) in exchange for periodic interest payments and the return of the bond's face value at maturity. Bonds are generally considered safer than stocks, as they provide fixed income and have a priority claim over stocks in the event of bankruptcy. However, they typically offer lower potential returns compared to stocks.
In summary, stocks offer ownership and potential for higher returns with higher risk, while bonds provide fixed income and lower risk.
» More
» Less
