Bonds Versus Stocks: Where to Put Your Money
Should you invest your money in bonds or stocks?
- Benefits of Bonds
- Weaknesses of Bonds
- Benefits of Stocks
- Weaknesses of Stocks
- What Is Better: Bonds or Stocks?
Are you a businessman from China looking into Philippine Investments? Companies in the Philippines that are looking to expand and grow their operations issue bonds and stocks to help earn money. Bonds and stocks are two significantly different business ventures you can utilize in good investments in the Philippines to make your money grow. Read on to learn more about the pros and cons of bonds versus stocks.
Companies in the Philippines that are looking to expand and grow their operations issue bonds and stocks to help earn money. Bonds and stocks are two significantly different business ventures you can utilize in good investments in the Philippines to make your money grow. Read on to learn more about the pros and cons of bonds versus stocks.
Benefits of Bonds
A bond is when you invest in a portion of a company’s debt. These bonds are usually issued by trusted financial institutions such as banks and multinational corporations with a set timeline. With bonds, you will consistently receive interest and principal payments during a set period. Once the period is over, you will receive your entire investment plus interest. However, bonds do not give you voting rights nor a share in the profits of the company.
Weaknesses of Bonds
Bonds are some of the more stable kinds of investments. Principal and interest payments given to you are set no matter what. The biggest risk could come if the company cannot pay back its obligations, which is not a problem if you invest in a reputable institution.
Unlike stocks, how the company does in terms of profits (either good or bad) does not affect the bonds you have. It does not get any lower, but it also does not get any higher. This is not an investment for you if you would like to take the risk of possibly getting a higher return.
Benefits of Stocks
Stocks actually give you a portion of the ownership of the company. Unlike bonds, investing in stocks allows you to have benefits such as the right to vote on important issues. As an owner, you will also be treated to the profits of the business. The higher the profit of the company, the higher the payoff you get as well. Compared to a 0.5% per annum interest rate if you invest in bonds at a bank, with stocks you can get as high as a 10% or 20% increase in the case that your company of choice does well.
Weaknesses of Stocks
The problem with stocks is that there are multiple factors that could cause a decline in the stocks that you invested in. If the company does not do well in terms of profits and loses a significant amount of money, then you also lose a significant amount of money. If negative news or information about the company is released, it could mean a future decline in its stocks. Even a change in the stock market itself could cause a rapid decrease in the majority of company stocks. Since stocks are a long term game, knowing when to pull out is crucial. The worst case scenario is if the company becomes bankrupt, which often causes shareholders to completely lose their investments.
What Is Better: Bonds or Stocks?
When choosing whether to invest in bonds versus stocks, the answer greatly depends on the kind of investor that you are. If you are the kind to take risks in hopes of a higher outcome, then stocks could be the investment you were looking for. However, if you’re the kind of investor that likes to keep things on the safe side, then bonds will be able to provide you with that kind of stability.
Whether you choose bonds, stocks, or a combination of both, there are many options for a businessman from China looking into Philippine Investments. Consult with companies to find good investments in the Philippines that are best suited for you.