ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Investing in bonds always entails higher risks than investing in stocks
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Investing in bonds always provides higher return than investing in stocks.
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Investing in bonds has a higher money-making potential than investing in stocks.
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Investing in stocks has a higher money-making potential than investing in bonds.
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Detailed explanation-1: -What’s the difference between stocks and bonds? The main difference between stocks and bonds is that stocks give you partial ownership in a corporation, while bonds are a loan from you to a company or government.
Detailed explanation-2: -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-3: -Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns. By owning a mix of different investments, you’re diversifying your portfolio.
Detailed explanation-4: -Stocks have historically delivered higher returns than bonds because there is a greater risk that, if the company fails, all of the stockholders’ investment will be lost (unlike bondholders who might recoup fully or partially the principal of their lending).