First what is the disproportion in between the batch as well as the bond? What is the benefits of trade Bonds for Stock? And if the association fails as well as has to record failure that is improved to own ?
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{ 4 comments… read them below or add one }
Stock is ownership in a company
A bond is a loan to the company
Stocks are more volatile and riskier than bonds. Bonds provide income to the investor under a contract. Stock dividends must be declared by the Board of Directors each time they are paid.
If a company fails it is better to own bonds because they get paid ahead of common and preferred stockholders.
bonds are ahead of stocks in bankruptcy proceedings. But that might not mean a great deal. Normally, stock owners loose everything. Bond holders loose almost everything. Sometimes in a reorganization they are given stock in exchange for their bonds–some stock but usually not sufficient to cover their investment. A bond is a debt obligation of the company. It normally has a date when it must be paid back. Stock is an equity stake in the company. There is no redemption date for stock except maybe for preferred stock which is actually more akin to a bond. Bonds pay interest at a fixed rate. Stock may pay a dividend which might occasionally be increased if the company is successful. Such companies as Coke, Walmart, Procter and Gamble, Chevron frequently raise their dividends usually annually. That answers most of your question. I am not really prepared to address the portion of the question of the benefit of trading bonds for stock.
Although things can get slightly blurred a stock is part of a company’s equity and a bond is a prt of the company (or government’s) debt.Stock is therefore normally called shares (not exclusively) and debt is called bonds. You also have hybrids like preference shares.
In an insolvency equity always comes last.
Stock: can give you higher returns, but also at higher risk. If a company goes bankrupt, stock holders are the last ones to get paid (typically nothing will be left out for stockholders).
Bond: moderate (known) returns, with low or no risk. Bond is an obligation and hence company has to pay bondholders, even if it is bankrupt
Which one to own?
Depends. If the company is good, and if the investment is long term, go for stocks. If the investment is short term, and if the person cannot take high risks, go for bonds