Stocks and Bonds – What’s the difference?

It doesn’t matter if whether you have been investing for a while or you are new to the process, at some point someone will advise you to split your investments across both stocks and bonds. The thing is though that if you don’t understand the difference between the two then you could be missing out on huge potential returns and safer risks. So what are stocks and bonds and what makes them so different?

Stocks

If you purchase some stock from a company then in principle you are buying a part of them. The stock is yours for as long as you want it and its price will directly result in how well or how poorly the company is doing at the time. So if the company turns a good profit over the course of the year then you can expect your stock price to go up, if you looking to sell then this would be the time to do it, as you will maximize your profit. However if the company does poorly or is linked to anything negative then the stock prices will go down resulting in you losing money if you sell at that time. This is however the perfect time to buy.

Bonds

If a company doesn’t want to go public but vitally needs funds to expand or venture into new areas then they might take out a bond in the public exchange. A bond is much like a loan were people like you invest your money into a company and then at outlined intervals you will receive a payment. The amount that they pay out will be determined on how risk the investment is. Then after a certain amount of time the bond will expire and the company will pay you back your initial investment. Unless that is of course that they can’t pay you the money back.

So what difference does it make to you?

So what difference does it make whether you buy into stocks or bonds? The answer is actually a huge difference depending on the type of investments you are seeking. If you are looking for investments with high returns that can turn over quickly then you want to invest your money into stocks. Bonds are slow burning and they don’t usually provide a huge turn around.

However if you are looking for a regular income and you don’t want to risk losing all your money overnight then you would be wiser to invest in bonds. Bonds are normally a much safer option and they more often than not pay out at least what you paid in. The same statics do not apply to stocks were anything can happen, depending on how the company is doing and how it is reflected in the media.

In conclusion

Splitting your money between stocks and bonds could be the best thing that you ever do. The bonds are a security blanket were you are guaranteed an agreed amount of money at regular intervals, if you  invest enough money then these can really provide a stable flow of money. The stocks however are a great way of making huge sums of money in relatively short periods of time but they come with high risk factor and you could just as easily lose your money. So having a healthy balance of safe money and risk money creates a fall back for any investor who wants to make their living that way.

The Top 5 Stocks Of 2014

It doesn’t take Warren Buffet to see that this year there have been some clear forerunners when it comes to the stock exchange. Several large companies have entered the exchange for the first time this year and they have been making ripples ever since. It’s not just the new comers though, several other large companies have turned over huge profits this year and they have seen their stock prices soar through the roof. So who should you have been putting your money on and who could you still make money from?

Twitter

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Twitter went public last November and has been creating a stir ever since. The company was initially being put on the exchange for the conservative price of $26 a share; however by the time the company become open for business those stocks had sky rocketed by 74%. On the closing of November 7th, Twitter had a stock worth of $44.90. Today the stock is averaging from between $29 to $74, making it a steady bet.

Facebook

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Facebook went into the stock market at $38 and saw a steady drop all the way till the exchange closed that night. This of course was seen as a huge set back and for the first six months of trading Facebook remained an unsteady choice. However since then Facebook has managed to claw its way back and its stocks have been steadily rising ever since. In 2014 Facebook gave their website a tonne of new features that are aimed at making revenue for the company. So the future for Facebook and its stocks looks positive.

Google

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You couldn’t have a top stock list without Google. Google have had a great couple of years with their releases of Smart phones, Android software and other lines of tech. That is to mention on top of their highly popular search engine that was just built to make money through targeted advertisements and vast user data collection. So it’s only right that their place in the stock market is mentioned. Due to the ever changing world of tech it is possible to pick Google stocks up while they are going quite cheap and with ever new release they announce those stocks go shooting back up.

Linkden

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Linkden is the third social networking site to hit this list and for good reason. When they first entered the exchange their shares doubled on the first day. Not only did Linkden prove that it was more stable than Facebook but it also proved more popular with the companies who bought the stock. Linkden is a social networking site that is designed around business and is very successful within the corporate world. Linkden has remained a steady stock ever since it’s opening and has more than proved itself as a great investment.

Apple

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Apple are a little bit of a love / hate company. People either love their products and therefore own the whole range of products or they hate them and won’t have anything made by them in the house. It doesn’t matter though because those tech heads who love Apple will always strive to have the newest model of their phone or computer system. Apple produce a new phone ever year and they potentially sell that phone to the same people who bought their last model the year before, this makes them a very steady stock in the market to watch.