Stocks And Bonds
Stocks: In this type of investment, the investor purchases the shares of a particular company for a specific period time. After the maturity of the period the investor receives a dividend on the number of shares purchased. The investor who purchases the shares will be called the Shareholder of the company. Stocks are considered to be the most risky type of investment. Generally, there are two types of stocks used for investment, that is, preferred stock and common stock.
In every country, stock activities are regularly monitored by stock exchange like in London there is New York Stock exchange, in Pakistan there is Karachi, Islamabad and Lahore stock exchange. The stock exchange is an authorized body that carefully carries out all the investment activities. All the companies have to be listed with the stock exchange in order to purchase stocks of other companies. The de-listed companies can never perform investment activities. New York stock exchange is considered to be the world's largest exchange with approximately 2,764 listed securities. The exchange has latest stock prices and stock quotes available, that provides stockholders and brokers to conveniently perform any transaction. The stock exchange is important because it keeps a close eye on the investment activities performed by conventional and investment banks. In 1929, a huge stock market crash was observed due to poor performance of commercial banks. This lead to the need of stock exchange, so that all the stock transactions can take place on one platform.
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These days penny stocks are gaining significant important among emerging investors. These stocks do not require large sum of money, therefore, they are considered to be useful and less risky for beginners. The changes observed in stock prices of penny stocks are minimal as compared to normal stocks. In order to purchase penny stocks an investor must first study the guidelines and tools uploaded over the internet. The investor must exercise his investment options after carefully evaluating the stocks tips and guidelines.
Bonds: Bond is viewed as a debt security as it helps in raising funds for a firm. An investor injects its capital in bonds in order to earn an interest cash flows for the time period for which investment has been made. When the bond matures the investors receives his initial investment along with the final coupon installment. Bonds are considered to be safer investments than stocks, as the coupon rate received does not fluctuate very often. On the other hand, stock investments do carry a volatility risk, as the price of a particular share can fluctuate significantly. Since bonds mature after three, five and ten years, therefore, its interest payments are higher are compared to dividend payments. Bonds are more liquid than stocks, so, an investor can sell the bond in order to attain his initial investment.
There are several forms of bonds available in the market. The most important is US savings bond. These saving bonds are also called treasury bonds. These bonds are offered by the treasury department of US government. These are considered to be the safest investment securities, as they have a strong support of US credit department of government. The saving bonds are issued to generate finances for the US government. Eurobond refers to the bond offered in domestic country's currency but is traded in a foreign country and in different monetary conditions and regulations. There are many other bonds transacted, namely, junk bonds, zero-coupon bonds, Brady bonds etc.
The stocks vs. bonds battle will continue until these investment securities prevail. No matter how diversified investment products emerge, bond and stock market will hold a significant position among investment securities. No other investment product can diminish the value of stocks and bonds, as this is the world's largest trade market.
