What’s The Difference Between A Stock And A Bond?
This poses an interesting question because it highlights how many people really have no idea about the different type of investment “vehicles”, as they are often called.
*You know what “equity” is, right?
Especially if you own a home, it’s the difference between what you owe and what you own. If you have a $300,000 house and you owe $200,000, then you have $100,000 in equity, or ownership.
Stocks are much the same thing, except that what you own is (typically) a VERY small piece of a major company. In most cases, you’ve already paid for it in full, and therefore you own it outright with no debt. (It is possible to borrow ownership, but that’s a level 200 course).
This is why stocks are often called equities, and vice versa. Think of yourself as a part owner, you can attend the annual meetings and vote on issues as requested by the board of directors – using what are known as “proxy statements”.
You will probably have a very limited impact on the direction of the company unless you own 5% or more of the outstanding stock, what most people buy stocks for is to Read More …
