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Should You Invest in Stocks or Bonds?
Stocks and bonds are two of the most common investment asset categories. When you invest in more than one category, you reduce your overall investment risk, so many people add a mix of both stocks and bonds to diversify their portfolio. The right mix depends largely on your financial goals, because these two asset classes play different roles.
Stocks are a form of ownership – a company sells shares to raise money. When you purchase a share of stock, you’re purchasing an ownership stake in the company. Bonds represent debt – a government or company issues a bond, or an I.O.U., to raise money with the promise to pay back your original investment, along with regular interest payments.
The volatility of stocks makes them riskier than bonds, but they also offer the greatest potential for growth, especially in the long term. Bonds may offer more modest returns, but are typically less volatile than stocks and are also advantageous for their income from the interest payments. For more information on the right investment mix for your financial goals, please give us a call or visit our website today.
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