DIFFERENCE BETWEEN STOCKS AND BONDS

DIFFERENCE BETWEEN STOCKS AND BONDS

Sometimes it’s difficult for the new investor to differentiate the difference between the two. If I must say so, there are people who have been investing for a long time, but still they have not been able to articulate the difference. People think that stocks are more riskier then bonds and basically it is true also,
STOCK means ownership of certificates in multiple companies. The price to the stocks will actually depend upon the performance of the company. If company is doing well you will share the appreciation, but if the company has gone in loss, then u will equally be sharing the loss.
BONDS are “credit “given by the investor to the company. It’s a kind of loan provided to the company to carry on their activities. The percentage the investor gets is fixed.
The shareholder would stick to the shares even in bad times and would expect that the company would do better in future, but the bondholder is just concerned with his initial amount and the interest from the company.
It is possible that investor has invested in a small and a risky company and if the company shuts down then the bond holder has to lose his initial investment as well, but this happens in a rear case.

So what would be a wise investment BONDS OR STOCKS?
Well. It depends on the person personal decisions and what is his risk tolerance. Though the ideal long term portfolio could be a blend of little bit of both.