A Closer Look at Stocks and Bonds

Posted on Apr 24, 2013 | 0 comments

If you are not in the business world, dealing and looking into the financial aspect of anything is simply the presence or the lack of money in it. Financial terms would be alien to you even if they really are the simplest of terms. It would be greatly helpful for you to know a thing or two about financial terms in these days thus we go into discussing the difference between stocks and bonds.

They almost seem, sound and mean the same for laypeople but they are actually different from one another at some point.

Stock
It refers to the share or a small portion of ownership of the business. You can look at it in percentage or potions. Such as buying 50% of a company’s stocks means that you own half of the company. Buying stocks or investing in them can be a huge risk because you never know if you will gain something in it or lose it in the process. The goal of buying stocks is to be able to sell them at a higher price, if the company do not succeed then you’ll be left with useless stocks that you can’t even sell because the company went bankrupt.

Bond
This one, on the other hand, is sort of a loan that you provide a company. They may need it for expansion purposes or for continued sustenance; there is actually a wide variety of reasons. If they need money they can offer public bonds instead of stocks. When a company initially starts to sell stocks to the public it published an IPO or initial public offering. The rules here is that the selling company will receive an interest rate for the sold stock besides the principal. The money borrowed will have to be repaid with interest during the set deadline and that the remaining becomes part of the capital to the borrower. So this means that the company goes in debt when they have bonds but they do not lose ownership of their company.

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