A straightforward explanation of what stocks and bonds are and what the difference is between them.

Stocks

Stocks are owned shares in a company or business.  Stocks are sold to investors whom hopefully will benefit from their investment by being a share holder in the company.  Company profits are shared accordingly; however, company losses are, as well.  Stocks have the most potential to earn money; much greater than bonds, however, the risks are much higher.

Imagine investing in the ownership of a large or even small company; essentially when you buy stocks, this is what you are doing.  Many investors have made themselves rich by investing in the right stocks; qualified investors research trends and companies both in the UK and globally.  Most investors and those buying stock will research companies here at home and abroad; talk with their financial advisor and choose a plan suitable for them.

For those that want to invest in the market for long periods of time; generally at least ten years; stocks have been known to raise great profits for investors.  Even during fluctuating markets; the long-term stock market always has out paid the long term bond market.  For those that plan on investing for a short amount of time; bonds are more likely the better plan.  However, you may want to consider a mixture or combination portfolio.

Bonds

Bonds are simply loans made to companies, corporations, and governments.  Bonds are paid back at a fixed rate of return.  Most bonds are very safe for investors; however, your return on the investment will be much lower than stake holders.  However, if you are owed bonds for a small corporation that has just went bust; you will be paid prior to any stockholders.

The economy is the raining factor that governs the bond market; interest rates fluctuate according to how the world is operating.  Higher interest rates mean better returns; however, the ability to sell is difficult.  Bonds are generally traded via security firms and banks; however, some corporate bonds are traded on the stock exchange and may be purchased through stock brokers.  Most financial advisors recommend having a diversified financial portfolio; even for those at a young age.  Bonds can help take the blow out of a fluctuating market.

For those with years to invest, a crash to the stock market can be devastating; therefore, having some bonds in your portfolio will hopefully eliminate a complete wipe out.  But don’t be afraid of the stock market; throughout history the market has waved up and down to those that decide to invest.  It’s a rollercoaster ride and it’s a gamble; but in the long run, it will most likely payoff.  As you reach your mid-fifties or near your retirement age; most financial planners will advise to leave the stock market at least 7-10 years prior to your retirement date; bonds in this case are generally the safest place to put your money.

It’s never too early to start investing in the stock market or investing in bonds.  In fact, most employers offer some type of retirement scheme for their employees where stocks and bonds can be invested.  Take advantage of any pension plans or savings plans that allow for your money to grow for your future.