Stock Market

The bond is a popular fixed-income security. But in the world of finance, you've probably heard the term tossed around with stocks as if they're one and the same: "Stocksnbonds, stocksnbonds." Well, obviously, they're not.

For one, when you buy a stock you are buying equityownership in the company that issued the stock. You are now an owner, entitled to share in the profits and to suffer the losses of the company. The company may or may not pay you dividends, depending on whether or not profits rise. The price of the stock you own may or may not rise. If it does, you could sell it and get your investment back many times over. But when you buy a bond, you are buying debt. You are not an owner; you are lending money to the company (or government) and it has agreed to pay you interest and to pay you back at a certain date. You are promised a specific return (the interest) on your investment, as well as the eventual return of your investment. Because you are not an owner, you are not entitled to a share of the company's profits, nor are you expected to suffer its losses.