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.

1. DIFFERENCE BETWEEN STOCKS AND
BONDS
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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.
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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.

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