Stocks and Bonds Basics
01.Stocks: Equity Ownership
When you buy a stock, you purchase a tiny ownership share in a public company. If the company grows and makes profits, your share value increases. However, stocks are volatile and their values can drop quickly.
02.Bonds: Debt Investments
A bond is a loan you make to a company or government. They pay you a fixed interest rate for a set period and return your principal at maturity. Bonds are safer than stocks but offer lower growth potential.
03.Asset Allocation
A balanced portfolio combines both: stocks for growth and bonds for stability. Your allocation depends on your age and risk tolerance; younger investors can afford more stocks, while those closer to retirement need more bonds.