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Difference Between Stocks and Bonds

Stocks and bonds are two separate ways for a company to raise money in order to fund and expand their companyu2019s operations. While issuing stocks a company is selling a piece of their company in exchange for money. Whenever a company issues a bond, it is issuing debt with an agreement to pay interest for the use of the money.

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Difference Between Stocks and Bonds

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  1. Difference Between Stocks and Bonds By SmartMoneyGains.com

  2. INTRODUCTION: Investors are always told to diversify the portfolio between bonds and stocks. Here you need to understand the difference between stocks and bonds. Let us understand the difference between the two: Stocks are ownership stakes and bonds are debt: Stocks and bonds are two separate ways for a company to raise money in order to fund and expand their company’s operations. While issuing stocks a company is selling a piece of their company in exchange for money. Whenever a company issues a bond, it is issuing debt with an agreement to pay interest for the use of the money.

  3. Stocks are shares of individual companies. Let us understand it with the help of an example: If there is any new successful startup company and their owners wish to expand their business but don’t have enough funds then they can look for financial markets for additional financing. One way to do it for us to split the company into shares and then sell a part of these shares to an open market in a process known as an initial public offering or popularly known as IPO.

  4. According to Stock Market Analysis, if you are buying a stock then you are actually buying a share of that company making you a small owner. This is the reason why stocks are referred to as equity. Bonds, on the other hand, represent debt. Any government or corporation that needs to raise money borrows money in the public market and pays investors the interest on that loan. Each bond has some par value and also pays a coupon to their investors. For Latest Stock Market News, visit Smart Money Gains.

  5. The Difference for Investors The owners share the profits and losses of the company to the owners of the stocks. Someone who has invested in the stock can benefit if the company performs well and its value increases over time. On the other hand, if the company fails to perform well, then the stock price can go down and in the worst case scenario, it can disappear altogether. Bonds lack the powerful return potential if the stocks. These bonds are mostly preferred by the investors for whom income is a priority. Also, they are safer than stocks. The prices of bonds fluctuate from time to time in the market. The bonds have the potential to pay back the full amount of principal at maturity and there is less risk of loss than there is with stocks.

  6. Which is right for you? There are people who invest in stocks and bonds to diversify. This way, they can earn profits from both.

  7. CONTACT US: FOR ANY INFORMATION ABOUT OUR PRODUCTS AND SERVICES, FEEL FREE TO VISIt www.smartmoneygains.com or drop us an email at: info@smartmoneygains.com

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