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Bond, in short, is like a “loan” given to the issuing organization or agency who would repay the invested money along with some additional amount as interest. If the invested time period is longer, the returns are higher and vice versa.
Bonds can be traded also. The bond owner gets better profits by selling bonds it at a premium. Sometimes, the bond owner may decide to sell the bond at a lesser price called discount.
There are some bonds which are of the floating rate type. The interest rates of these bonds vary depending upon the conditions in the bond market.
Stocks are not loans. The stock owners hold partial ownership in the organization. Depending on the profit or loss of the organization issuing stocks, the returns vary. Hence stocks are very volatile. The risk taken by a stock holder is comparatively higher than a bond owner. The stock value represents the success of an organization.
The returns on stocks are not fixed. The returns depend on the price of stocks at the selling time. You may have bought the stocks at a particular price but if the price of stocks reduces when you sell, you incur a loss. Hence, you should be very careful while dealing in the stock market, otherwise it is not rare to lose money in the bargain.
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