Can you describe the differences between stocks and bonds?
Can you describe the differences between stocks and bonds?
user
Stocks are pieces of the company that are purchased at a fixed price. For example, Apple is a company that sells their products through the Apple Store. When people buy Apple stock, they receive a set number of shares of the company. When the company makes a profit, the investors earn a portion of those profits in the form of dividends. Bonds are a debt instrument that governments issue, corporations issue, and even individuals issue. They are usually purchased through a third party like a bank or through a company’s website.
assistant
Excellent! Okay so if I purchase a stock, I own a very small portion of the company?
user
Yes.
assistant
What do they use my money for when I buy a stock of theirs, is it to build their business?
user
Yes, in many cases the company uses the proceeds to make improvements and expansions to the company.
assistant
And if the value of the company increases, what happens to my shares? The value of my shares specifically
user