What is the difference between bonds and stocks?

If you’re new to investment, understanding how to interpret your portfolio or information on available asset classes might seem confusing. One area of financial jargon that you might want further information on is the difference between bonds and stocks.

What are stocks?

Put simply, stocks represent an investor’s part ownership in an enterprise. For instance, if an investor owns 10 shares in an enterprise with a total of 100 shares, they’ll own 10 percent of the company. When an enterprise is financially successful, so are its investors; however, if it does poorly, this will have a negative impact.

What are bonds?

Bonds are a type of loan that investors give to an enterprise. A government or enterprise will pay investors interest for using their money. For instance, if an investor buys a bond for £100 with a fixed interest rate of five percent over five years, the enterprise will owe the investor £100, plus interest.

An enterprise must pay the bondholder back any accrued funds, but a stockholder need not be paid anything, as they are taking a risk on an enterprise doing well.

If you’re currently looking for help with wealth management in Chester and Shropshire, we can help. At Hartey Wealth Management, we offer our expertise and an extensive range of services to assist our clients. Whether you’re seeking to establish a well-balanced portfolio with different stocks and bonds or a second opinion on your current assets, contact us today to discuss your financial ambitions.

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