Bond Vs Stock Market – Which Is The Best Investment Option?
Among the prominent financial centers of trade, the names of bond and stock market are quite evident. The key role of such centers is to help in raising fund. They are utilized by the businesses and the governments too. When we talk about the bond market, the key aspect of this market is that in this market, government participates more and as far as stock market is concerned, the investors and the companies that are needed to sell their equities participate fully.
Bond market is actually known as a debt market too and when a company feels the need of loan then it issues its bond that is bought by the interested investors. Actually in this way, investors provide loan to the companies and in return they get a bond that holds date of maturity and the interest rate. The benefit behind such investment is that the investors do not only get the principal amount but the interest too. The investors possess the right to sell these bonds to other people too once they have purchased from the company. Stock market is also regarded as the share market. The stock market has some resemblance with the bond market but it is different too in some aspects. In this market, the investors do not provide loan to the companies. Actually, they have to purchase the company’s equity that will depreciate or appreciate in value with the working conditions of the company. Such people or investors who hold the share of the company are being paid the dividends if the company is desperate to share the profits. The value of stock can increase too with the span of time. There are some key points that help us in truly identifying the basic differences between bond and stock market.
These points are as follows:
- It is considered that the bond market is more secure and safe when it is compared with the stock market because the bond market does not get affected with the reactions of the investors as we see in the case of stock market. The second thing is that the bond is surer than the stock. Particularly when we talk about the government bonds, they are considered the most advantageous and solvent form of investment.
- The bond holders have no right to influence the decisions that are taken by the company where as the stock holders can influence the company’s decisions because they possess the share and they have right to exercise their ownership.
- Stock market is more liquid than the bond market because shares are traded easily whereas the bonds cannot. Speculation is a major part of a stock market and it is done to make the profit possible whereas in bond market it is very hard to some extent. So profit ratio is high in stock market when it is compared with the bond market.
In short, these are some points that truly help us in differentiating between stock market and the bond market in wider terms.