Understanding Stocks and Bonds

stocks and bondsAs you learn about the basics of financing your future it is important to understand the opportunity for long-term investment in stocks and bonds. Corporations use stocks and bonds to raise money in order to grow their company.

What Is A Stock?

A stock is a type of investment that represents ownership in a company. Buying a share of a company allows you to become part owner of that company. As the company grows so does your investment and vice versa. Do your research and choose wisely before investing, stocks do not guarantee a certain amount to be paid back for your investment and not all companies grow.

How Do You Make Money In The Stock Market?

The goal of investment in stocks is to choose companies that you feel have a high potential for growth. As the company grows the value of their stock will increase leaving your profit as the difference between what you paid for the stock and its new value, you will realize the profit when you choose to sell the stock.  Keep in mind that this does not happen over night, stocks are a long-term investment.

What Is A Bond?

A bond is a type of fixed investment, when you purchase a bond you are loaning money to a corporation or the government. In return you will receive interest for your loan. Each month you will receive a check for the interest earned and at the end of the bond you will receive the original amount that you loaned. Your money is typically safer in the bond market however your earnings may not be as high as an investment in the stock market. Be sure to do your research before loaning your money to ensure that the borrower will be able to pay you back in full.