Nowadays, there are lots of different ways to effectively invest their capital.You can open a deposit at the bank, to buy property, engage in trade currencies on Forex, or buy gold bullion.In this article we would like to draw your attention to the stock market.It addresses a huge variety of securities, each of which has its own specifics and peculiarities.Let's try to tell me more, what a share, which represents a bond, since these securities often are of interest to potential investors.
This paper is probably the most common tool of trade on any stock exchange.Shares are issued (released) at the basis of various joint stock companies or as a result of reorganization in the company of this type.The initial value of one share is determined by the ratio of the size of the authorized capital to the amount of such securities.They are implemented to shareholders, and thus, each of them contributes to the development of the company.Whoever holds the shares, is entitled to receive income due
What is a bond?
After we discussed what action, go to the essence of the bond.Like shares, these shares are also available in order to attract additional capital.They come into circulation in the predetermined timeframe during which the bondholder receives a clearly defined income as a percentage of the original cost.When the circulation period expires, the bond is returned to the issuer and in return receive a discount - the amount of funds that were originally paid for the purchase.
stocks and bonds.Similarities and differences
similarity of these securities is that they are both a source of attracting the necessary financial resources.Purchased as a result of the initial issue, they can be subsequently sold at a lower price to other investors.With stocks and bonds, you can get income from both the ownership of these securities, as well as the difference between the purchase and sale of other investors.
differences are the ability to control the emitting company.What is the action at this point?This paper, which says that it is a co-owner of the company and the right to participate in making all important management decisions.At the same time the bond is essentially an IOU, certifying that the person has given funds loaned to the state or the company, and after a certain period it will receive for a fixed fee.As a rule, the amount of dividends on shares exceeds the amount of interest on the bonds, but at the same time investing in stocks more risky, since market conditions are constantly changing, and it so happens that a recent favorite is dramatically transformed into an outsider.
Thus, the investor can choose what is best for him: a reasonable risk with higher income, or the stability of a small but guaranteed profit.Knowing what action and what are its differences from the bonds can distribute your capital in an optimal proportion between the different financial instruments.Such diversification will help you find the very "middle ground" that will bring sustainable prosperity in the future.