So, what are stock and bond investments? These tools basically allow you to invest your money and make a good return over time.

Companies are split into shares called stocks. By investing into a companies stock you become a partial owner of the company. Over time as the company grows so do it’s shares of stock also if the company has dividend stocks you recieve income as the company makes a profit. The idea here is to buy strong stocks that are likely to go up and then hold onto them until hopefully sell the stock for more in the future.

Bonds work a little differently. They allow you to buy a portion of the company’s debt. Basically when you get into a bond you are loaning money out to the individual company. In exchange you receive monthly interest payments and when the bond expires the company buys back the bond at whatever price it is currently trading at. The idea is to get into a bond, receive the interest payments and hopefully profit when the company buys the bond back.

So which one of these two strategies is better? If you take a close look at Stocks and Bond you will find that they both have some positives and negatives associated with them.

The advantage of bonds is that they are considered safe. If the company owes you money they are required to pay you back. So as long as the company is still around you should make money. The bad part about this is that bonds typically have a pretty low yield. Safer investments tend to pay poorer returns.

Stocks on the other hand have the potential to give off much higher returns, but they are also considered riskier and more volatile then bonds.

Each is a little different and each individual investor can decide which one seems like a better investment for them or you can take the generally recommended approach and diversify your money across both assets.

Basically stocks allow people to become a partial owner of a specific company. So, if you buy stock in Microsoft then you own a percentage of Microsoft. As that company grows overseas and expands then the stock also appreciates.

If the company offers a stock paying a dividend then the company is actually paying their investors a small percentage of their profits just for holding onto their stock. If you owned stock in a company and they made money last month they can send you a percentage of their earning.

Bonds work slightly differently. If a company needs to borrow money they can always issue something called a bond. Investors that buy bonds don’t own part of the company and do not receive dividends.

Instead bond holders are holders of debt. Bonds are pretty much loans, when you buy a bond you give a loan and reveive interest payments. This is very similar to how morgages work only you play the bank.

When the bond eventually expires then the company pays back their investors the face value of that bond, hopefully for a profit. Then investors may choose to take that money and reinvest it into another bond to make more.

So, which investment is better? That is up to each investor. Normally bonds are considered safer because it does not need a company to grow in order to make money. But if you look at a stock market graph it is easy to see that stocks tend to be more profitable over the long term.

Some investors will do half and half, others will choose which investment fits them the best. But in the end it is really up to each individual investor to determine which one is best for their specific goals and risk tolerance.