Differences between stocks and bonds

Stocks and bonds are both marketable securities and are two major financial tools in the securities market. Both are released in the primary market and transferred to the secondary market. For investors, both are financing methods that can raise capital through public issuance. It can be seen that both are essentially Capital Securities. From a dynamic perspective, the stock yield and price affect each other with the bond interest rate and price, and the stock market is usually moving in the same direction, that is, one rise and the other rise, and vice versa, however, the increase and decrease are not necessarily the same. These are the relationships between stocks and bonds.

Although stocks and bonds are both marketable securities, they can both be used as financing methods and investment tools, but there are significant differences between them.

1. Different issuer

As a fund-raising means, bonds can be issued by national and local public organizations or enterprises, while stocks can only be issued by joint-stock enterprises.

2. different benefits and Stability

From the perspective of income, before a bond is purchased, the interest rate has been fixed, and fixed interest can be obtained upon expiration, regardless of the company's profit. The stock interest rate is not fixed until it is purchased. The dividend income changes with the change of the profit situation of the stock company. If the profit is more than the profit, the profit will be less than the profit, and the profit will not be profitable.

3. Different protection capabilities

From the perspective of the principal, the principal can be recovered when the bond expires, that is, the linked credit can be obtained, just like the debt. The stock does not expire. Once the stock principal is handed over to the company, it cannot be recovered. As long as the company exists, it will always be at the company's disposal. Once the company goes bankrupt, it depends on the liquidation of the company's remaining assets. At that time, even the company's principal will be eroded, especially for minority shareholders.

4. Different Economic Benefits

The above profits indicate that bonds and stocks are essentially two different types of securities. The two reflect different economic interests. Bonds represent only one kind of creditor's rights to the company, while stocks represent ownership of the company. Different ownership relationships determine that the bond holder has no right to ask about the company's operation and management, while the stock holder has the right to directly or indirectly participate in the company's operation and management.

5. Different risks

Bonds are only common investment objects, and their transaction turnover rate is lower than that of stocks. stocks are not only investment objects, but also major investment objects in the financial market. Their transaction turnover rate is high, large changes in market prices can result in sharp increases and decreases, low security, and high risks. However, this increases the expected revenue, attracting many people to stock transactions.

In addition, when the company pays the income tax, the interest of the company's bonds has been deducted from the income as a fee, and is in the forefront of the income tax. However, the dividend of a company's stock is the distribution of net income, not the cost. It is charged after the income tax. This has a great impact on the company's financing decision-making. It is often used as the decisive factor in the selection when deciding to issue stocks or bonds.

From the above analysis, we can see the characteristics of the Stock: first, the stock can not be handed back. Once the stock is sold, it cannot be returned to the company, and it cannot be returned to the company. Second, stocks are risky. Whether or not the stock can earn the expected income depends on the company's operating conditions and the stock exchange market. This is not fixed, and the changes are huge, so we must prepare to take risks. Third, the stock market price is volatility. There are various factors that affect stock market volatility, including internal and external companies; operating and non-operating; economic and political; there are both domestic and international. These factors change frequently, causing constant fluctuations in the stock market. Fourth, stocks are highly speculative. The higher the risk of a stock, the more fluctuating the market price, the more conducive to speculation. Speculation is destructive, but it also accelerates capital flow, accelerates capital concentration, is conducive to the adjustment of industrial structure, increases the total social supply, and has an important positive significance for economic development.