Looking for new investment opportunities? Are you one of many learning about the stock market? Or were you given some bonds as a birthday present a few years back and want to know if you should buy more?
You’ve come to the right place. It’s always smart to think about how to use your money to make more money, and it’s a common question to ask, “bonds vs. stocks?”
We’ll define and share how both are ripe options for investing.
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What Are Stocks?
When a company goes public, they offer investors an opportunity to own a stake in their company. Stock, by definition, is the security that shows ownership over this fraction of the company.
Simply, if there are 100 stocks and I own one of them, I own 1% of the company. The more I own, the more I have a stake in that company. By owning stock, I am considered a shareholder.
And public companies love their shareholders. The money spent on stocks goes to the company so that it can further its goals and ambitions. This, in turn, allows them to succeed, ideally making the stock price go higher.
Depending on the stock you invest in, there are also stock dividends. This is an increase in the number of shares of a company that is given to current shareholders.
This does not increase the value of the stock you’ve purchased; rather, it devalues it. However, your increase in overall stock nets even.
Most companies rely on stock exchanges, a market where buyers and sellers meet and do business.
What Are Bonds vs Stocks?
Bonds are conservative investments and are similar to paying for a loan, either to governments or companies. For example, the United States may offer a seven-year bond for $1,000 with a 2% interest payment.
This means you give the U.S. $1,000, and after seven years, you’ll receive the $1,000 you initially invested and the interest payment. This makes them stable, low-risk, and a
It’s possible to invest in other country’s bonds. Check out thejerusalemportfolio.com for a non-American investment opportunity.
When comparing the bond market vs stock market, both are similarly competitive in purchasing options. This is done online or through a broker.
Bonds vs. Stocks
Stocks come with risks. Depending on the market, an individual stock may rise and fall on factors that are hard to determine.
For example, if the company produces a new product making waves, the stock price may rise. If, however, there’s a terror attack unrelated to the company, the stock may fall.
Do your research before investing in a companies stock options. The reward is greater. The risk is greater.
Meanwhile, bonds are considered a safer investment option. And as you get older, you aren’t going to want to risk losing money in the short term because of the roller-coaster stock market.
Invest Your Money
You now know the trade-offs of bonds vs. stocks. Knowing when to buy bonds vs stocks depends on your age and desire for risk vs reward.
If you can spare the risk and choose to hold during dips, stocks can lead to significant long-term gains.
However, if you don’t want the risk, or the potential reward, bonds are still a superior option to hiding the money under your mattress. It’s guaranteed more money in the end.
Continue doing your research and make a decision that fits your and your family’s financial needs.
Want to learn more about making your money go further? Check out our other finance blog posts.