| Stocks and bonds, like Frick and Frack and Abbot | | | | inherent risks to them. The flip side of this coin, of |
| and Costello. You rarely think of one without the | | | | course, is that stocks have the potential of large |
| other. But what exactly are the differences | | | | returns and profits. |
| between stocks and bonds? Actually, though they | | | | When you purchase corporate bonds, on the |
| do share some core similarities, in many ways | | | | other hand, you are basically loaning money to |
| they are very different types of investments. | | | | that corporation. You become one of their |
| Like stocks, bonds are sold by corporations and | | | | creditors, and in return you are given a fixed rate |
| can be traded on the open market. Bond interest | | | | of interest over a fixed period of time. There is |
| rates also fluctuate and are subject to the | | | | little risk of losing money when investing in bonds |
| volatility of market conditions. But the similarities | | | | unless the company goes completely belly up, and |
| tend to end there. | | | | even then, the risk of not being paid back is low. |
| Stocks and bonds are very different in terms of | | | | Of course, there is no potential for wild profits |
| risks and rewards. Each share of stock purchased | | | | with bonds either. |
| represents ownership in a company. As part | | | | The differences between stocks and bonds tend |
| owner, you share profits as well as losses with | | | | to complement each other, which is perhaps why |
| that company, depending on its success or failure. | | | | they go so perfectly together. Most financial |
| This means that, though some stocks are safer | | | | planners agree that a good investment portfolio |
| than others, all stocks, by nature, carry some | | | | should always contain both stocks and bonds. |