What is the difference between stocks and bonds?
Although stocks and bonds are both types of securities, a stockholder, in essence, owns a part of the issuing company. A stockholder or shareholder of a company has an “equity” interest in the company by way of the stock. On the other hand, a bond holder is a lender to the issuing authority of the bond. Another difference between stocks and bonds is that while a bond usually has a defined term or maturity date, stocks may have an indefinite duration. What is a Mutual Fund? Another type of security is a mutual fund. A mutual fund is a form of investment whereby the fund manager gathers money from many investors and invests the money in different types of secutities. These may include bonds, stocks and other money market instruments. The fund manager is responsible for trading the fund’s underlying securities, realizing capital gains or loss, and collects the income. Any proceeds of the investment are then provided to the individual investors.
