Types Of Investments And Bonds

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Introduction This paper will examine two basic types of investments; stock and bonds, from an investor’s perspective highlighting the advantages and disadvantages between common stock (equity) and corporate bonds (debt). Webster Dictionary defines investment as “the outlay of money usually for income or profit usually in a tangible asset such as property ”. With both stocks and bonds, the only thing tangible is a simple piece of paper, a certificate. On the surface, these certificates may seem the same, however there is a very important fundamental difference. Owning a stock certificate is evidence of being a shareholder; hence money is exchanged for a portion of ownership in a company. A bond certificate, on the other hand, represents a contract and evidence of giving a loan to a company. Stocks are considered equity investments and bonds debt investments. This key difference brings its own set of pros and cons to each of these types of investment and affects their level of risk and return. The Advantages of Stocks Corporations issue both stocks and bonds to raise capital to purchase land, equipment, building, or even pay off debt. However, there are several advantages to investors to purchase a stock in a corporation over bonds. First, when you purchase a share of stock you essentially become a part owner in the company. With this ownership comes special privileges, such as the right to vote on who sits on the board of directors and on matters that could

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