Stock and Bond Investment
A stock is a share in the ownership of the company you have invested in. By owning an amount of stock, you will be paid dividend as and when the company declares. When you own a stock, you have the total control of this stock. You can sell it anytime if you think that you no longer intended to own it or you think that it is not worth to own it. You can also keep it for your whole life and use it as collateral to borrow money from bank or financial institution. Stock investments can be long-term or short-term investments.
A bond is a debt security which the bond issuer owns you if you have bought the bond and is obliged to pay interest or repay the principal at a later date. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Bonds are bought and traded mostly by institutions like pension funds, insurance companies and banks. Most individuals who want to own bonds do so through bond funds.
Though stock and bond are securities, there are some differences in their investment policies. Major difference is that stock investment gives you the share of ownership of the listed company whereas bond investment doesn’t give as bond holders are lenders to the issuers. Another difference between stock and bond investment is that bonds usually have a defined term or maturity after which the bond is redeemed. On the other hand stocks may be outstanding. Bond usually has contract type repayment schedule and once they have paid back all the money that you have lent to them, the bond will end. Once the expiration date has over, the whole investment will become worthless. On the other hand, the ownership of a stock can not be cancelled unless the company is declared bankrupt.
Thus, while choosing between stock and bond investment be aware of these facts and then decide the right investment policy for you.