You probably know that stocks are the big-boys in the investment world. Businesses live and die on stocks. A publicly traded stock can give a company much needed capital to help it grow; and, of course, when it grows, Rothenberg.ca investors get a return. At the same time, if a company cannot grow, the investors lose out and that deters other investors from joining the fray.
Indeed, stocks can be a profitable and smart investments, but they are also risky, and because of that, you might want to consider investing in the bond market instead.
The Benefits of Investing in the Bond Market
Essentially, a bond is a loan that is provided by an investor to a company, in exchange for interest. Bonds can be safer than stocks because they are more structured, offering a fixed payment schedule to you, the lender, until full repayment of the original capital (by a set date).
Bonds carry the following benefits:
The Risks of Investing in the Bond Market
While the benefits might make the bond market seem like a no-brainer, every investment carries some risk. That being said, bond risks are generally more reasonable. Here are some of the risks associated with investing in the bond market:
As you can see, these risks are minor when compared to those associated with other equity investments (such as stock and real estate, for example). Still, there are only two types of bonds—which also makes this investment class easier to understand.
These bonds allow for citizens of a country to loan money directly to their government to reap the interest, similar to a bank; except in this case, you are not loaning that money to a company. Of course, these can greatly vary but, in general, they have a fixed redemption date.
Generally regarded as simpler than government bonds, corporate bonds are often less complex. These debt obligations are often issued in round number. It is important to remember that risks and benefits can vary depending upon the volatility, behavior, and, overal, success of the corporation associated with the bond.
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