Difference between Stocks and Bonds

While almost all people know about stocks and stock market, but very few know about bonds and bond markets. To get a better idea about bonds one must look at the difference between stocks and bonds market, let’s look at some of them –

1. When one is buying a stock of a company then actually he or she is taking ownership in the company, but if one is buying a bond then he or she is giving a loan to a company and therefore bond represents the creditors of the company while stock represents the owners of the company.

2. In bond markets debt securities, prominently bonds are traded while in stock market is a place where securities like common stocks and derivatives like options and futures are traded.

3. As stock market is very volatile due to which it is more risky to invest in stocks while bond market is less volatile and therefore less risk is involved when one is investing in bonds.

4. While stocks are traded on stock exchanges but bonds are traded over the counter and there is no central place or exchange for bonds.

It is important to have knowledge about the markets so that one can decide a right strategy for his or her portfolio and get the desired return on the portfolio.

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