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Difference Between Bonds and Stocks

stock-market-dbBonds and stocks are both methods of investment. The main difference between bonds and stocks is in what you own.

A bond is issued, generally by a government entity such as a federal government or a city government.  The concept of a bond is simply that at the issue of the bond you give the issuer money. In the issuing of a bond there is a time set that the bond will be cashed in. The value is also set at the time of the bond’s issue. It may be that the bond’s original value will earn a specified amount for the duration or a specific amount may be set. With a bond the only thing that you own is the bond and you should ensure that you understand the details of the bond before purchasing it. In some instances the bond may be worthless under certain circumstances, for example if the organization dissolves.

The concept of a stock is that you hold a percentage of ownership in the company while you own the stock. It’s important to understand the details of your ownership before purchasing the stock just as it is with a bond. You may be entitled to a vote in company decisions. You may also have a worthless certificate in the event the company goes bankrupt.  You may also receive dividends while owning a stock.

Stocks and bonds are ways that organizations can attempt to get capital immediately. They are also ways that individuals can participate in shaping the future of something larger.

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