COMPREHENSIVE GUIDE ON STOCKS AND BONDS
Posted: March 23rd, 2023, 10:45 am
The word stocks and bonds are usually paired together when referring to investments,but their risks, returns and behaviors have stark differences.
Differences Between Stocks and Bonds.
The major differences between stocks and bonds is:
1.Stocks gives partial ownership in a corporation, while bonds are a loan from you to a company or government.
2.When you buy stocks,it means you are actually purchasing a tiny part of the company that is one or more "shares."And the more shares you acquire the more of the company you own while bonds there is no equity involved,nor any shares to buy.
3.Stocks are considered riskier than bonds.The value of stocks can rise or fall at any time based on factors ranging from company earnings to global economic conditions while bonds provide a regular payment that once it is locked in it is not affected by financial or unexpected events.
4.Stocks trade on exchanges that act as central marketplaces to bring buyers and sellers together while bonds does not have a centralized trading platform and bonds are usually sold over the counter and are bought and sold between counterparties.
5.Stocks offer the potential for gains but also significant losses while bonds does not.
6.To buy an individual stock, you go through a stockbroker either a human stockbroker or an electronic brokerage while to buy a treasury bond you go through the U.S. Treasury.
7.To earn money from stocks, you would need to sell the company’s shares at a higher price than you paid for them to generate a profit or capital gain while Bonds generate cash through regular interest payments.
8.Bond payments are usually subject to income tax, while profits from selling stocks are subject to capital gains tax.
Both the stocks and bonds can play an important role within a long-term investment strategy. Understanding how stocks and bonds differ,how they each generate returns,and their respective risk properties can help develop a portfolio that suits individual investment objectives.
Differences Between Stocks and Bonds.
The major differences between stocks and bonds is:
1.Stocks gives partial ownership in a corporation, while bonds are a loan from you to a company or government.
2.When you buy stocks,it means you are actually purchasing a tiny part of the company that is one or more "shares."And the more shares you acquire the more of the company you own while bonds there is no equity involved,nor any shares to buy.
3.Stocks are considered riskier than bonds.The value of stocks can rise or fall at any time based on factors ranging from company earnings to global economic conditions while bonds provide a regular payment that once it is locked in it is not affected by financial or unexpected events.
4.Stocks trade on exchanges that act as central marketplaces to bring buyers and sellers together while bonds does not have a centralized trading platform and bonds are usually sold over the counter and are bought and sold between counterparties.
5.Stocks offer the potential for gains but also significant losses while bonds does not.
6.To buy an individual stock, you go through a stockbroker either a human stockbroker or an electronic brokerage while to buy a treasury bond you go through the U.S. Treasury.
7.To earn money from stocks, you would need to sell the company’s shares at a higher price than you paid for them to generate a profit or capital gain while Bonds generate cash through regular interest payments.
8.Bond payments are usually subject to income tax, while profits from selling stocks are subject to capital gains tax.
Both the stocks and bonds can play an important role within a long-term investment strategy. Understanding how stocks and bonds differ,how they each generate returns,and their respective risk properties can help develop a portfolio that suits individual investment objectives.