Bonds and stocks are two popular investment options, but they work very differently. Bonds are essentially loans you give to a company or government in exchange for regular interest payments and the return of your initial investment at the end of the term. They are considered safer investments because they offer steady returns and are less affected by market fluctuations.
Stocks, on the other hand, represent ownership in a company. When you buy stocks, you become a shareholder and may earn money through dividends or by selling the stock at a higher price. However, stocks come with higher risks as their value depends on the company’s performance and market conditions, which can be unpredictable.
The main difference is that bonds provide fixed income and are ideal for conservative investors looking for stability, while stocks offer higher potential returns but involve greater risk. Both have their own advantages and can complement each other in a diversified investment portfolio, depending on your financial goals and risk tolerance.