Anyone who has any experience in investing has wondering if they should be investing in stocks or if they should look towards bonds. The answer is that it depends on what exactly you are looking for in your investments.
If you are looking for long term capital growth with a decent amount of risk, then you should look towards stocks or pieces of ownership of a company. Buying stock in a company is actually buying a small ownership stake in the company which will hopefully grow over time. As the company becomes larger and more profitable, you make money. Stocks tend to have nice rates of growth as well as other benefits, like dividends.
By investing in stocks, you are taking on some risk. The company or companies that you choose could actually begin to fail as a business, and then you are part owner of a failing business that is losing money. However, as long as you spread you money around several different companies, then your odds of success are high.
If you are an older investor who is looking at retirement in the next 10 years or so, then perhaps you should consider bonds. Bonds are loans made to companies that they use to pay off some of their debt. The company then pays you back with interest after a certain period of time. Bonds are considered to be far safer then stocks. This is because even if a company fails, they have to pay off their bond holders first. The bonds typically do not make as much money for their investors, however they are considered far safer then stocks.
Which side of the stocks vs bonds debate that you fall on usually depends on what your life situation is. Before you make any decisions about your investments, you should gain as much knowledge about them as possible.
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Mon, Jun 28, 2010
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