Stocks or Bonds?

Stocks or BondsWhich is better, stocks or bonds? Some are thinking that it is safer to get a bond that it is to get stocks. These people feel that overall a bond is less risky than stocks are. Are they right?

So what are bonds? These are debt instruments used by the United States government. What you do is you buy a bond; the money goes to the government. When you are ready to cash in that bond, you will get your money back and then some. There are different types of bonds that you can purchase.

Most agree that the United States Government Treasury Bonds are the safest. This is because they are backed by the full faith and credit of our government. You can get three types of these. The first is known as a bill, it takes sixty days to one year to mature. The next kind is called a note; this takes one to ten years to mature. Then there is the bond, this takes ten to thirty years to mature.

You can also get a cooperate bond, which as the name suggests, you get from a cooperation. These bonds have callable dates, this means that you can cash out your bond before it matures. Before purchasing one of these it is a good idea to find out if this is secured by the assets of the company or not.

Municipal bonds are issued by the state and local governments, and high-yield bonds are riskier cooperate bonds. These are the last types of bonds. If you purchase a bond you have many options to choose from.

So what are stocks? When you purchase a stock you are actually purchasing part of a company. This can be a big gamble. If the company does well, you stand to make more money. However, if the company goes under, you lose all the money that you had in that company.

So which is better? It seems as though bonds are much safer than stocks. With stocks if you have too much money in one company and they go under, you stand to lose a lot of money. Some bonds are riskier than others too. Some of them are secured, but others are not. Which one you want to purchase is up to you, but it is best that you know what you are doing and you know if the bond is secured or not. You also need to make sure that you know if the bond you buy has a callable date or not. Another thing you need to make sure you know is how long it takes your bond to mature.