difference between stocks and bonds /title> <meta name="description" content="difference between stocks and bonds - These two are financialinstruments that are used by a company in raising the necessary capital fromthe market. "> <meta name="keywords" content="difference between stocks and bonds, "> <link rel="stylesheet" media="screen" type="text/css" href="../images/geny.css" /> </head> <body> <div><img src="../images/banner.jpg" width="100%" height="150" /></div> <div><img src="../images/topbar.jpg" width="100%" height="22" /></div> <div class="gog"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </div> <div class="content"> <h2 title="difference between stocks and bonds">Difference between stocks and bonds</h2> <p>We often use to hear about the term?s <em title="Difference between stocks and bonds">stocks and bonds</em>. These two are financial instruments that are used by a company in raising the necessary capital from the market. It has been seen that though a person is familiar with both these terms, he often remains confused. There are of course differences between stock and bonds. Before we discuss these differences, let us first try to understand the meaning of these two. </p> <div align="left"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </div> <br> <p><strong> STOCK AND BOND </strong></p> <p>Stock, also called as equity in general language, is basically a financial instrument that represents the partial ownership of a person in a corporation or the company that has issued the stocks. Thus, the stocks gives rights regarding the ownership and if the company or the corporation does well, the value of stock increases and hence, the value the person holds by way of stocks also increases. But it is to be understood completely here that in case the company does not do well or becomes bankrupt, the stock holders, as they are the partial owners, has to face the music and in many circumstances, he has to loose his entire investment made in the stocks of the company. Thus, there are no guaranteed returns or appreciation when a person invests in the stock of a company. There is high element of risk associated with stock. </p><table width="100" border="0" align="right"> <tr> <td><script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script></td> </tr> </table> <p>As far as bonds are concerned, these represent the loan that a person makes to any corporation or company by way of accepting its bonds. The government also issues these bonds and thus, in such circumstances, a person makes a loan to the government. It is to be noted here that there is some guaranteed return on bonds and thus, there is no element of risk associated with the bond. For example, a person can easily buy a US Treasury bond by paying $100 and gets a guaranteed 4.75% interest rate for a term of 5 years. Thus, for five years, he gets an assured return and after five years, $100 is returned back to. This is the reason why the bonds are called as loans. Those persons who can afford to get less return but want assured returns, goes for bonds. After having understood the definitions of two financial instruments, I think we are now in a position to understand the differences between the two. </p> <strong>DIFFERENCES BETWEEN STOCKS AND BONDS </strong> <p>There are many differences that can be cited on the basis of definitions given above. </p> <p>First of all, the bonds do not allow for any type of ownership of company or corporation etc that has issued the bonds. But in case of stocks like shares etc, a person gets partial ownership of the company and can easily take part in its various proceedings by way of general annual meetings etc. </p> <p>The second different lies in the fact that a person is not entitled to get any regular income by investing in stocks. If the company registers profit, the person shall be a part in profit, depending upon the number of shares or percentage of stock held by him. But in case of bonds, the person is entitled to get the regular income at a predetermined rate of interest for the time period mentioned in the bond certificates. On the completion of the term, the person is entitled to get his money back that he has lent to the company as the original sum. </p> <p>One of the important differences between the two is that there is no maturity date in case of stocks and a person can retain the stocks as long as he wishes or can sell it any time thus, relinquishing the ownership in favor of some other person or company. But in case of bonds, there is always a maturity date on which the bonds becomes repayable. A person can thus plan in advance the different ways in which the money can be reinvested. </p> <p>In case of <em title="Difference between stocks and bonds">bonds</em>, there is no element of risk associated and a person can relax easily getting the assured sums at regular intervals. But in case of stocks, there is high element of risk associated and a person is rewarded many times by way of high appreciation in the stock for this risk element. All those persons who can stand this risk element go for stocks otherwise, they like to go for the bonds. Even among bonds also, the bonds issued by any government department are liked mostly, as there is 0% element of risk associated. It is to be understood here that a person should invest the money in bonds of those companies that have high creditworthiness, though the coupon rate or the interest rate provided by these companies is low. Government bonds are thus, good option. It is to be noted here that in case the bonds pertain to smaller companies that attract people with high coupon rates, a person can be deprived of his money when the company goes bankrupt. </p> <p>As far as the sale of two financial instruments is concerned, both, bonds and stocks, can easily be sold and purchases. Most of the bonds are traded in the OTC market or over the counter market that is made of banks and other security firms. There are also some corporate bonds that are listed on the stock exchanges and these can easily be bought by way of stockbrokers. In case of stocks, these are easily tradable. These are listed on the stock exchanges and a person can freely sell or purchase these during the market hours. The <em title="Difference between stocks and bonds">stock brokers</em> also help a person in selling and buying of stocks. </p> <p>For short term investments, the bonds are considered better whereas for the long term investments, the shares are considered better. The bonds are debt whereas the stocks are equity. In case of dissolution of firm, the bonds get precedence over stocks and thus, in such circumstances, the person holding stocks can easily suffer loss. </p> <p> <strong>THUS, DECIDE ACCORDINGLY </strong></p> <p>There are many <em title="Difference between stocks and bonds">differences between the stocks and bonds</em>. These differences are cited above and a person can easily go for any of these depending upon his risk bearing capability. For short term, bonds are better option whereas for long term, stocks are considered better. </p> <p><font color="#FF0000"><b>Other Articles</b></font></p> <li><a href="commodity_futures_online_trading.html">commodity futures online trading</a></li> <li><a href="commodity_futures_trading.html">commodity futures trading</a></li> <li><a href="commodity_online_trading.html">commodity online trading</a></li> <div><img src="../images/bottom.jpg" width="100%" height="22" /></div> </div> </body> </html>