In the case of bankruptcy, bonds generally provide more safety than stocks. You can read more about why here. Bonds vs. Stocks: Lender vs. Shareholder
When you buy a stock, what you are buying is a small piece (or a large piece if you are someone like Warren Buffet!) of ownership in a company. As an owner you have special privileges, including the ability to vote on matters that affect the future of the company. More importantly however, is the fact that as a stockholder you have the right to share in the profits of the firm, when and if those profits are paid out in the form of dividends.
Just as a company can raise money by issuing and allowing people to buy its stock, companies can also raise money by issuing debt in the form of a bond offering. When you buy a bond you are not getting any ownership in the company, but rather you are buying a piece of the company’s debt. As a bond holder you have no voting rights and do not get to share in the profits of the company, however you do receive other advantages that you do not get when buying stock in a company.
Bonds vs. Stocks – How you Make Money
One of the primary reasons why the price of a stock goes up or down is the profitability, or lack thereof, of the company whose stock you own. If the company makes a lot of profits, then its shareholders (the people who own stock in the company) often stand to make a lot of money as well. Conversely, if the company loses money, then its shareholders generally expect to lose money on their investment as well. If things get so bad with the company that it can no longer pay its obligations and files for bankruptcy, stockholders are generally last in line to get their money back, and therefore often lose their entire investment
As a bondholder you receive an interest payment at specified intervals, regardless of how the company is doing (as long as the company does not go bankrupt). While the price of a company’s stock will be affected by any piece of...
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