What are the differences between stocks and bonds?

09/04/2007 00:00:00 - views: 3,107

It’s often called stocks equity securities, and bonds debt securities. When an investor buys stocks from a listed company, they signify his or her partly ownership in the company as much as the stock value he or she owns.

On the other hand, when the investor buys bonds from the company, he or she loans an amount of money as much as the bond value he or she owns to the company.
There is a connection between a bond and a stock if a bond is convertible. From the beginning, the investor buys a bond that means lending the equivalent amount of money (not including commission fee). Then, he or she will set conditions that bonds will be wholly or partly convertible to stocks by value, because he or she expects the company will make profits and have a promising future with big earnings.

Then, from a creditor, he or she becomes one of the company’s owners, and converts debt securities into equity securities.

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