Bonds and stocks are very similar securities in many respects. For example, market value of both are determine?
February 9th, 2010 | 
Author: Bonds and stocks are very similar securities in many respects. For example, market value of both are determined by their expected future cash flows; and both show price sensitivity- some more, some less- to a set of common market factors. At the same time, some may even go further and state that when it comes to portfolio investing details, there is really no difference between the two either. What do you think? Do you think that investing in financial assets is just investing and it does not matter whether we are talking about bond portfolios or stock portfolios? What advice would you give to your clients?
Actually, stocks and bonds are paired a lot in discussion however they have little in common.
stocks are equities
bonds are debt
Commonality is that they are sold in an open market but SEPARATE and completely independent markets.
Both are not accordingly priced based on future cash flows. There are many other factors that determine prices.
bonds are more impacted by interest rates.
stocks are more impacted by earnings (fundamentals), and technical (chart) factors.
I don’t know what you are really asking in RE: What advice would you give to your clients? – That is a loaded question contingent on a ton of more factors and those are different per client’s objectives and risk tolerances, age, income, debt, etc.
Posted in stocks and bonds
Actually, stocks and bonds are paired a lot in discussion however they have little in common.
stocks are equities
bonds are debt
Commonality is that they are sold in an open market but SEPARATE and completely independent markets.
Both are not accordingly priced based on future cash flows. There are many other factors that determine prices.
bonds are more impacted by interest rates.
stocks are more impacted by earnings (fundamentals), and technical (chart) factors.
I don’t know what you are really asking in RE: What advice would you give to your clients? – That is a loaded question contingent on a ton of more factors and those are different per client’s objectives and risk tolerances, age, income, debt, etc.
References :
— Finance & Risk Management Consultant
— 21 years market experience (see bio/ add me to view post history)
You are joking? They are completely different.
http://www.shareworld.co.uk
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You have got to be kidding.
Stockholders are OWNERs of the company and have 1) virtually unlimited upside potential, 2) are on the bottom of the chain at dissolution 3) get to vote and 4) are guaranteed nothing.
Bondholders are LENDERS to the company and have 1) very little upside potential 2) are paid at dissolution long before common stockholders, 3) do not vote 4) are guaranteed semiannual interest payments and return of the principal.
If you are talking to some one that is equating bonds and stocks as similar investing opportunities, run for the door.
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