RE: What is the difference between stocks and bonds?
What is the difference between stocks and bonds?
- Meaning: Stocks are simply share of company while bonds represent debt.
- Priority of repayment. In the event of the liquidation of a business, the holders of its stock have the last claim on any residual cash, whereas the holders of its bonds have a considerably higher priority, depending on the terms of the bonds. This means that stocks are a riskier investment than bonds.
- Periodic payments. A company has the option to reward its shareholders with dividends, whereas it is usually obligated to make periodic interest payments to its bond holders for very specific amounts.
- Voting rights. The holders of stock can vote on certain company issues, such as the election of directors. Bond holders have no voting rights.
