Stock Investing Strategies

Stock investments

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Investing in Stocks and Bonds

Investing into stocks and bonds can be an extremely profitable thing, if you do it right. So, what are bonds and stocks, and how to they help investors make money?

Lets look at stocks first. Basically these are just small percentages of a company, when you buy a stock you buy a small portion of the company. For example, if you bought a few shares of Pepsi stock then you are now a partial owner of the Pepsi company. As the company expands and grows over time then the stock would increase in price.

If the company offers a high dividend stock then the company is actually paying their investors a small percentage of their profits just for holding onto their stock. If you own a dividend stock in a company that is making money then chances are you are getting a somewhat consistent cash flow from that investment.

Bonds work slightly differently. If a company needs to borrow money they can always issue something called a bond. Investors who buy the bond do not receive dividend payments nor do their investments appreciate if the company appreciates.

But they do benefit from buying the security. Bonds are pretty much loans, when you buy a bond you give a loan and reveive interest payments. If you ever wanted to be on the opposite side of a bank loan then this is for you.

Bonds also have an expiration date. When they come due the investors will receieve payment for the full price of the bond. Then investors may choose to take that money and reinvest it into another bond to make more.

So, what is the better investment? Every investor has their own opinions on this. Normally bonds are considered safer because it does not need a company to grow in order to make money. However if you take a look at a stock market history graph it is easy to see that stocks tend to be more profitable over the long term.

Some investors will do half and half, others will choose which investment fits them the best. But in the end it is really up to each individual investor to determine which one is best for their specific goals and risk tolerance.

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