Stock Investments Vs Bond Investments

So you've gotten to the point in your life where you're looking to start investing your money, but you don't know much about how it works or what options are out there.
It's OK; most people come into the market not knowing much.
In these days of belt-tightening and financially conservative investing, it's especially important that you familiarize yourself with your options and know the advantages and (maybe more important) the disadvantages of your options.
Buying Stocks When you buy stock in a company, you are buying a percentage of the total ownership of that company.
Publicly traded corporations like Microsoft and Nike are actually owned by thousands of investors who own small chunks of the company.
The investors elect a Board of Directors, who work to pay dividends to stockholders so that they see an increase in value on their investment.
Not all stocks are created equal, though, and the advantages and disadvantages vary between types of companies.
Large, stable companies are traditionally referred to as "Blue Chip" companies, and while they rarely provide huge returns on investment, they are much more likely to provide a consistent positive yield on investments.
Smaller, younger companies are called "Small Cap" companies (short for "small capitalization") tend to be more volatile because of their smaller market share and start-up nature.
These companies are more likely to provide larger short-term returns, but they are also more likely to take larger short-term losses.
Investing in small cap businesses is riskier, and like all risky propositions, can potentially pay off more.
Buying Bonds Unlike stocks, bonds do not confer ownership.
That is, they are strictly loans, and investors who make these loans are not buying ownership in the company or organization.
Both companies and governments issue bonds.
Like all loans, they will be paid back with interest, hence the attraction of the loan.
When the original investment (called the principal) is returned, the bond has "matured.
" Depending on the loan, the bond may take decades to mature.
The main draw of the bond over the stock is its stability.
Bonds are much more likely to return their investment, particularly government bonds.
However, the returns are much lower than the potential returns for stock investments, since there is a set amount loaned and returned.
Many investors, though, are attracted to this exact quality in bonds, as they involve a lot less risk in the investment.
Ultimately, your preference for stocks or bonds may depend on your attraction to gambling.
A Complete Package Many strong investment portfolios contain a mix of Blue Chip, small cap, and bond investments to mitigate losses while encouraging high-yield potential.
A stock broker would be able to tell you more about investment strategies.