Stocks and bonds – differences

Stocks and bonds such as Frick and Frack and Abbot and Costello. You rarely think of one without each other. But what is the difference between stocks and bonds? In fact, although they have some core similarities, in many ways they are very different types of investments. Like stocks, bonds are sold by companies and can be traded on the open market. Bond rates also fluctuate and are subject to fluctuations in market conditions.

Stocks and bonds are very different in terms of risk and return. The shares purchased per share represent ownership of a company. As a part owner, you share profits and losses with the company based on its success or failure. This means that, while some stocks are safer than others, all stocks inherently entail some inherent risk. The other side of the coin is of course the stock has great potential for return and profit

When you buy corporate bonds, on the other hand, you are basically lending to the company. You become one of their creditors, in return, you get a fixed rate for a fixed period of time. When investing in bonds, it is possible to lose money only when the company is completely weak, and even so, the risk of nonpayment is low. Of course, there is no potential profit from the use of bonds

The differences between stocks and bonds tend to complement each other, which is perhaps why they are so perfect. Most financial planners agree that a good portfolio should always contain stocks and bonds