The Difference between Stocks and Bonds

bonds and stocks
bonds and stocks

 

An MBA graduate of Northwestern University’s Kellogg School of Management, Colin Robertson is a banking executive with wealth management firm Northern Trust in Chicago, Illinois. In this role, Colin Robertson oversees a staff of nearly 70 employees and provides input on bond investments to both internal partners and clients of the firm.

Though they represent two separate types of securities, bonds and stocks are frequently referred to together. These two kinds of investments are both among the most common choices for individuals looking to build a strong, balanced portfolio, but they provide owners with different sets of benefits and risks.

Bonds are a more stable option for investors because they consistently pay out at a fixed rate, typically twice per year. While bonds help keep a portfolio steady and generate an income, they lack the risk factor that gives stocks the potential to be exponentially profitable. Additionally, they are more likely to be affected by inflation. Conversely, stocks provide an increased potential for high profitably, but create a much stronger likelihood of deficit due to their dependence on market conditions.