Financial investments not only pave the way for a secure future but also strengthens the foothold of an individual in the present. Hence people should be aware of all the minute details of the instruments before they put their money into one. Although it is need-based, this process includes a little bit of far-sightedness for the investor to rake in the maximum financial benefit. Stocks and bonds are very common instruments where people tend to invest their money, depending on their short or long term financial goals.
Stocks are nothing but a share of the company that is selling it. It incurs ownership rights for that part of the share one buys. It is the company selling pieces of itself to people to accumulate investment. Investors of shares on the other hand not only have the right to buy but also sell it. If the stocks fetch a good price, one can sell it and earn much more than the investment amount. The buying and selling costs of the shares depend on the profitability of the company and various other factors. The trading of stocks takes place through a central exchange bureau like BSE, NYSE, etc.
Bonds are such fixed income instruments offered by companies and corporations. To simplify the process, it is like a loan given to the company from the investor, and at a mentioned time and date, the company is liable to return that principal amount with the interest amount to the investor. Here, the interest becomes the main profit for the investor. It is not equity and does not incur ownership rights. Bonds can be procured from offices and their other counters.
Stocks not only brings with it ownership rights but also voting rights in the company. This takes place in the form of dividends. Moreover, stocks are higher–risk platforms for investments. The price of a stock on a day can fluctuate due to various factors. Hence a close watch needs to be kept on the performances of a company before and after investing in their stock. The trick is to sell the stock at the right time to gain maximum profit out of it. Then again, it usually in rakes in much more financial return than a bond. It follows a principle of higher risk and consequent higher gains.
Bonds are good for long term investment if one does not want any hassles in the process. It has clear investment plans with fixed amount returns at the end of a particular term. It is a low-risk process. But in comparison to other investment instruments like stocks, it gives a much lesser financial return.
Hence, from a purely pragmatic viewpoint, stocks are better for good financial returns but include a little bit of observation of markets, performance of companies, etc. to get the best benefit from the investment. Bonds on the other hand are less profitable financially but are devoid of many risks. It is an ideal and safe financial instrument for investment purposes for the retired people. Therefore, the entire investment plan of an individual in stocks and bonds should be well suited to their own capabilities and requirements after being aware of the benefits of both, stocks and bonds