
Howtotradestocks.org

What is The Difference Between Stocks and Bonds

Firstly, let's take a look at what a stock and a bond is:

Stocks

If you own stock in a particular company, you own a portion of that company. It might only be a very small portion, but you still own it. If a company pays a dividend, as a stock holder you will receive a payment, the amount will be determined by how many shares you own in the company.

With any stock investment, the value of a stock can always go down as well as up. If the company performs well, the stock is likely to go up. If the company performs badly the stock is likely to go down. In the event of a company going bankrupt, you can lose your entire investment.

Bonds

A bond is a loan made to a company or government. Anybody can buy a US Treasury bond and get a "guaranteed" return. This type of bond is probably as safe as you can get, the US government has never defaulted on a bond, though nothing is impossible.

If you lend money to a company or a less secure government, you are likely to get a higher rate of return, but there is a higher risk of company or government defaulting.

Stocks and Bonds Information

The main differences are:

A bond is a loan, a stock is equity

Stockholders are subjected to volatility of the company's stock, bond holders are not

In the even of bankruptcy, bond holders get paid BEFORE stock holders

Stockholders may be entitled to dividends, bond holders never are, as they don't own any equity in the company.

Where to buy stocks and bonds?

Most bonds and stocks can be purchased from any major stock broker such as zecco. To see a more detailed list of stock brokers, feel free to visit my stock broker comparison page.