What are stocks? And how to tell the difference between stocks and bonds?

Bonds and stocks are two types of stock investment that are quite popular in the market today. However, choosing whether to invest in one of these two types is what makes investors wonder. Job Differentiate between stocks and bonds will help investors easily choose the right type of participation. First of all, we will go to understand the concept of bonds and stocks.

What is the concept of bonds and stocks?

What are bonds?

Bonds are also one of the types of securities. It is issued as a certificate or as a journal entry for the purpose of confirming the debt repayment obligation (principal and interest) of the bond issuer to the bondholders.

What are stocks?

To be able to make a comparison between bonds and stocks, it is first necessary to understand their nature. A stock is a type of security in the form of a document or journal entry. Simply put, this is a certificate issued by companies. This certificate is only effective to confirm ownership of one or more shares of that organization.

Differentiate stocks and bonds – similarities and differences

Similarities – compare bonds and stocks

Bonds and shares are both evidence confirming the holder's legitimate rights and interests in the assets or capital of the issuing company.
They are all types of securities expressed in the form of certificates, journal entries or electronic data.
Stocks and bonds can be implemented in forms such as: exchange, purchase, mortgage, inheritance or transfer of pledge.
They all earn interest, dividends on stocks, and dividends on bonds.
Is a means of attracting capital for issuers.

How are bonds and stocks different?

To distinguish between stocks and bonds as well as to know how bonds and stocks are different, we will adopt the following criteria through the following table:

Criteria	Share	Bonds
About the nature	As an equity security, the purpose of investment is to increase the owner's capital.	As a debt security, it does not contribute to the capital of the company's owners.
Ownership status	Stockholders are shareholders and members of the company. They will be able to own a part of the company's profits in the form of stock dividends.	Bondholders are creditors of the organization/company. Because bonds are considered a type of debit note.
The issue of benefits	The risk is quite high. Dividends are distributed depending on the production and business capacity of the company. When the business makes a profit, the new stock owner will receive dividends, and vice versa.	The level of risk is lower than investing in stocks. Profit will not change, it completely does not depend on the business results of the enterprise.
Owner's Responsibilities	Stockholders will be liable for the debts of the business in proportion to their capital contribution. In case the enterprise is dissolved, shareholders can only return the contributed capital after paying debts and obligations to the company.	Bondholders will not be subject to all of the company's debts. In case the company is dissolved or goes bankrupt, bond holders will have priority to pay before share holders.
Rights and obligations of the owner	Stock holders will be entitled to participate in the General Meeting of Shareholders of the enterprise as well as activities in the company.	Bond holders will not be entitled to participate in corporate governance bodies. Not allowed to vote on matters related to the company's operations.
Maturity time, settlement	No time is specified. There is no direct return.	Will be payback and have a defined time. The term is either short term or long term.
Legal consequences of the company	The result of the issue of shares will increase the charter capital of the joint stock company. And it can change the governance rights of shareholders in the company.	The results of the bond issuance will contribute to increasing the debt capital of the joint stock company. At the same time, it does not affect the governance rights of shareholders.

summary

Above are the knowledge about distinguishing stocks and bonds that you can refer to. Hope the knowledge that Market hot news can help you understand the similarities and differences between the two. From there, you can determine if you are suitable for bonds or stocks to invest in the most reasonable way.