ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In general, stocks are riskier than bonds, simply due to the fact that they offer no guaranteed returns to the investor, unlike bonds, which offer fairly reliable returns through coupon payments.

Detailed explanation-2: -With risk comes reward. Bonds are safer for a reason⎯ you can expect a lower return on your investment. Stocks, on the other hand, typically combine a certain amount of unpredictability in the short-term, with the potential for a better return on your investment.

Detailed explanation-3: -While stocks are ownership in a company, bonds are a loan to a company or government. Because they are a loan, with a set interest payment, a maturity date, and a face value that the borrower will repay, they tend to be far less volatile than stocks.

Detailed explanation-4: -Bonds tend to be less volatile and less risky than stocks, and when held to maturity can offer more stable and consistent returns. Interest rates on bonds often tend to be higher than savings rates at banks, on CDs, or in money market accounts.

Detailed explanation-5: -However, in return for the risk, stockholders have a greater potential return. Bonds are more beneficial for investors who want less exposure to risk but still want to receive a return. Fixed-income investments are much less volatile than stocks, and also much less risky.