Bonds and stocks are 2 different types of investment. Both have similarities and differences that you need to take into account when you are investing in them. If you would ask me right now which is better between the two, my answer is it depends. Bonds do not work for everyone and so as stocks. Some people are compatible with bonds and there are some who prefer stocks. Again, it’s not all about the question of which is better. It’s about what works for you and what’s right based on your capability and knowledge as an investor. Let me show you how these two portfolios work.
Catch me in my live training events! (quick plug)
The heart of why I do these seminars is I want to build a generation of Filipinos with the right foundation in stock investing. I want to bring smart investing to every Filipino around the world! If you would like to know more about how you could time the market check out the training below.
Bonds are considered debts. For those who are just starting to invest, bonds are usually offered at a fixed interest rate and the amount of interest depends on the company issuing the bonds. You might find up to 4% interest offers from the known companies here in our country. So, how do companies pay the interest and the bond itself? Interests are paid out every year while the principal is paid at a given time in full amount. It’s just like loaning your money to a corporation and receiving the principal plus interest in return. Also, bonds are not sold on the Philippine Stock Exchange. Instead, companies offered it over the counter.
Stocks are stakes in a company and it’s very different from bonds. Unlike bonds, stocks are riskier and you may choose to invest in it for long or short-term. Given the risks attached to stocks, you might lose your money overnight if you don’t know what you are doing. This is the reason why most stocks investors study companies every day and wait for news updates. If you will invest in stocks, you have to make sure that you do the same to avoid losing your money. Stocks are sold in the Philippine Stock Exchange and open for public investors.
In terms of risk, bonds are better for conservative investors. You can earn fixed income through bonds, unlike stocks that can’t guarantee earnings even if you trade or invest for a year. But, stocks are for the strong and brave souls. Once you’ve learned how the stock market works, you will surely earn big time. Stocks are also for investors who are interested to trade because it could be done overnight or for a couple of days. Regardless of which portfolio you choose, both require extensive learning and understanding. Do not invest if you know nothing about it. Invest in books and knowledge first.