It is time to get your money invested. How exactly will this money be allocated? After all, before you start purchasing assets such as stocks and bonds, a well-diversified portfolio approach is suggested. In reality, stocks and bonds are two of the most traded types of capital, each available on a variety of platforms or through a variety of brokers or markets.
The difference between stocks and bonds is that stocks are securities of a business's ownership, while bonds are a form of debt that the issuing entity agrees to repay at some future point. To ensure a proper capital structure for a business, a balance must be struck between the two types of funding. In particular, here are the main differences between the stocks and the bonds:
The stock and bond concepts are both distinct, with some features in common. Some bonds in particular are transformed to allow bondholders to convert their bonds to corporate stock at predetermined inventory-to-bond ratios. It becomes useful as the stock price of a company rises, enabling bondholders to make an immediate capital gain.