What is a share and a bond. Differences and risks.

In our time there are many different ways to effectively invest your capital. You can open a deposit in the bank, buy real estate, trade in Forex currencies, or buy gold bullion. In this article, we want to draw your attention to the stock market. It attracts a huge number of various securities, each of which has its own specifics and features. Let's try to explain in more detail what a stock is, what a bond is, since these are the papers that most often arouse interest for potential investors.

What is an action?

This paper is, perhaps, the most common trading instrument on any stock exchange. Shares are issued (issued) at the foundation of various joint-stock companies or as a result of reorganization of the enterprise into a company of this type. The initial value of one share is determined through the ratio of the size of the authorized capital to the number of such securities. They are realized among shareholders, and, thus, each of them contributes to the development of this company. Those who own shares have the right to receive income as a result of the company's profitable work on the basis of the results of the reporting year, if the majority of shareholders vote for it at the mandatory annual meeting. It happens that the company is suffering losses or it is decided to invest all the profits for the re-equipment or development of the company.

What is a bond?

After we have analyzed what the shares are, let's move on to the essence of the bonds. Like shares, these securities are also issued to attract additional capital. They are issued in circulation for a predetermined period, during which the bond owner receives a clearly established income as a percentage of the original value. When the circulation period expires, the bonds are returned to the issuer and receive in return a discount - the amount of funds that were originally paid at the time of purchase.

Shares and bonds. Similarities and differences

The similarities of these papers are that they both serve as a source of attracting the necessary financial resources. Bought as a result of the initial issue, they can be subsequently sold at a more favorable price to other investors. With the help of shares and bonds, you can get income from both the ownership of these securities, and in the form of the difference between the price of buying and selling to other investors.

Differences consist in the management capabilities of the issuing company. What is an action from this point of view? This is a paper that says that its owner is a co-owner of the company and has the right to take part in the adoption of all important management decisions. At the same time, the bond is, in fact, a debt receipt that certifies that a person has lent money to a state or enterprise and after a certain period will receive a fixed reward for it. As a rule, the size of dividends on shares exceeds the size of interest on bonds, but at the same time investing in shares is more risky, as the market situation is constantly changing, and it happens that the recent favorite turns into an outsider.

Thus, an investor can choose what will be better for him: a reasonable risk with a higher income, or stability with a small but guaranteed profit. Knowing what a stock is and what its differences from bonds are, you can distribute your capital in the optimal proportion between different financial instruments. Such diversification will allow to find the very "golden mean" that will bring stable prosperity in the future.