Stocks & Bonds
Stocks
Despite its popularity and presence in the news, the stock market is just one of many potential places to invest your money. Investing in stock is often risky, which draws attention to the huge gains and losses of some investors, but with our managed the risks, you can take advantage of the stock market to secure your financial position and earn money.
For investors who put money into different types of investment products, a stock market investment has the benefit of providing diversification. Stock market investments change value independently of other types of investments, such as bonds and real estate. Holding stock can help you weather losses to other investment products. Stock also adds risk to a portfolio, as well as the potential for large, rapid gains, helping investors avoid risk-averse or overly conservative investment strategies.
For investors who put money into different types of investment products, a stock market investment has the benefit of providing diversification. Stock market investments change value independently of other types of investments, such as bonds and real estate. Holding stock can help you weather losses to other investment products. Stock also adds risk to a portfolio, as well as the potential for large, rapid gains, helping investors avoid risk-averse or overly conservative investment strategies.
Bonds
Bonds also tend to perform well when stocks are declining, as interest rates fall and bond prices rise in turn. A Safer Haven for Your Money.
Essentially, the difference between stocks and bonds can be summed up in one phrase: debt versus equity. Bonds represent debt, and stocks represent equity ownership. This difference brings us to the first main advantage of bonds: In general, investing in debt is relatively safer than investing in equity. That’s because debtholders have priority over shareholders—for instance, if a company goes bankrupt, debtholders (creditors) are ahead of shareholders in the line to be paid. In this worst-case scenario, the creditors might get at least some of their money back, while shareholders might lose their entire investment depending on the value of the assets liquidated by the bankrupt company.
In terms of safety, bonds from the U.S. government (Treasury bonds) are considered risk-free (there are no risk-free stocks). While not exactly yielding high returns (as of 2020, a 30-year bond yielded an interest rate of about 1.7%), if capital preservation, in nominal terms, means without considering inflation—a fancy term for never losing your principal investment—is your primary goal, then a bond from a stable government is your best bet
Essentially, the difference between stocks and bonds can be summed up in one phrase: debt versus equity. Bonds represent debt, and stocks represent equity ownership. This difference brings us to the first main advantage of bonds: In general, investing in debt is relatively safer than investing in equity. That’s because debtholders have priority over shareholders—for instance, if a company goes bankrupt, debtholders (creditors) are ahead of shareholders in the line to be paid. In this worst-case scenario, the creditors might get at least some of their money back, while shareholders might lose their entire investment depending on the value of the assets liquidated by the bankrupt company.
In terms of safety, bonds from the U.S. government (Treasury bonds) are considered risk-free (there are no risk-free stocks). While not exactly yielding high returns (as of 2020, a 30-year bond yielded an interest rate of about 1.7%), if capital preservation, in nominal terms, means without considering inflation—a fancy term for never losing your principal investment—is your primary goal, then a bond from a stable government is your best bet