Bonds Vs Stocks, Which Are Better
Which one do you think is better? To look for an answer, we have to pin point a short comparison first with the two investments. Bonds are similar to what we call a loan. They are bought and sold in an open market. When you plan on investing your bonds, it simply means that are loaning the issuing company money. For example, if you have decided to loan your money to a different company or corporation, you receive receipt for such loan with all the interest from the company as a form of a bond.
Stocks on the other hand refer to when you buy shares in a particular company. This can give you a part ownership in the whole company. Your investment is affected with the performance of the company. If the company has improved their production, chances are you will also receive increased interest in your shared stocks.
Bonds and stocks are both profitable investments but have its own downfall. When you have invested in bonds, the progress of the company does not affect you at all for your income is fixed with the agreed interest in your contract. Unlike this, though in stocks, productiveness of the company can be shared equally to all its stock holders.
Since bonds are loans to a company they are subject to what is happening to interest rates. If interest rates are going up, the return on bonds goes down. Thus if interest rates are low and the feeling is that they will go up soon, an investment in bonds may not be a good idea.
Both stocks and bonds carry a risk but for me I would rather choose to invest in stocks since I wanted to risk the progress of my money than having a fixed rate of interest. In addition, bonds do have maturity rate that stops your investment on the said date. Only the principal amount will be returned to the investor on the maturity date.
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