Stocks Compared to Bonds
For many people stock and bonds like head and tail, up or down, or silver and gold all they know. If you want to be an investor, it's not a good thing. They are two different animals, with priority over two different types of investors.
Smart investors invest in both, plus alternative investments such as real estate and hard assets. Let us get the real basic about the famous, but not any means of the same twins … stock and bonds … stock with long term debt.
Shares (stock) represent the ownership of a company. In the long run, investors only have to buy a basket of stocks and hold each year, and there will be a 10% return. People who have the wrong people have a lot of risk, especially if you have them at the wrong time. When the economy deteriorates and the stock market falls, if you hold a variety of stocks, then they will lose the stock.
Simply put, when the company goes public and sells shares to the public, the stock (ordinary shares) then these stocks are Stock market transactions. When you buy a stock through a broker, you just buy the stock from the person you want to sell.
When you own the stock, you have a part of the company. If the company pays the dividend, you will get your stock based on the number of shares you own. If the stock price rises, you make money like all other shareholders. If the price falls, all shareholders will suffer.
If you want to achieve real growth as an average investor for the long term, most of the money you want to spend on work should invest in stocks. If you want to keep it simple, avoid choosing yourself and investing in stock mutual funds.
Bonds are safer than stocks, and in the long run, investors return nearly 5% or 6% per year. Most investors buy their higher interest they pay with bank money or other investment options.
Sometimes the bond returns double digits. At the same time, inflation is already double-digit, and bank CDs pay double digits, just as in the early 1980s.
Bonds represent long-term debt issued by companies such as the US government, state and municipalities and public entities. Where the issuer is borrowed from the public, promised to pay a fixed interest rate and pay the bondholder at the appointed time.
When you have these debt instruments, you do not have a part of the entity that issued the debt instrument. You just have an IOU. If the company issues bonds and later finds itself in financial distress, the bondholder's claim to the company's assets is higher than the shareholder.
These IOUs are issued to raise funds for long-term projects or expansion. Once they are sold to the public, they trade in the bond market, just like the stock traded in the stock market. These debt instruments are not risk-free investments. In order to make your investment life easier, invest in bond funds with personal problems.
Bankruptcy, government agencies into financial difficulties. In addition, when interest rates rise sharply, almost all of the existing bonds are less attractive and lose value.
In general, young people should emphasize the stock in their overall portfolio. Older people should tend to bond and other safer investment vehicles.
This is simple.