Stocks and bonds are two types of investments that people can use to grow their wealth. Stocks represent ownership in a company, while bonds represent debt that a company or government owes to the bondholder.
Stocks offer the potential for high returns but also come with higher risks. Since a stock's value is tied to the company's success, it can be subject to market volatility and unexpected events that can cause the stock price to fluctuate. However, over the long term, stocks have historically offered higher returns than bonds.
Bonds, on the other hand, are generally considered to be less risky than stocks. They offer a fixed rate of return, and if the issuer is a government, they are typically considered very safe investments. However, bond yields are usually lower than potential stock returns.
In general, stocks are better suited for those with a long-term investment horizon who can tolerate some level of risk, while bonds are better for those who prioritize safety and want to preserve their capital. Many investors choose to hold a mix of both stocks and bonds in their portfolios to balance risk and potential returns.
