Our article today reveals details about What is the difference between stocks and bonds, as the latter are very striking today.
What is a bonus?
Before knowing what the difference between stocks and bonds is, it is important to know that it is a bond, since this is nothing more than a financial instrument, it is simply a security, favorable to the holder and, in return, a debt to the issuer, This must have a minimum term of one year from the moment the bonds were issued.
What is a nominal value or denomination?
The nominal value is only the value that is recorded in a certain document, as this only reflects the capital or, failing that, the principal investor that is provided to the issuer, as this brings with it a series of details that we describe below.
ü Redemption date: this is simply the date on which the issuer agrees to cancel the loan he is receiving.
ü Coupons: these are simply the promissory notes that are attached to said document, as this brings with it the payment of the agreed interest on a constant basis.
ü Interest rate: this is only the interest rate that the bond issuer cancels, as it cancels interest on the nominal value of said redemption date.
ü Redemption value: this is the value that who issues the bond is obliged to cancel the holder of said bond.
What is the difference between stocks and bonds?
In order to explain the differences between the two instruments, it is important to take into account the types of bonds that exist and we will explain this below:
ü Financial leasing bonds, corporate bonds, subordinated bonds: these instruments that are generally issued by non-financial institutions, and aim to obtain resources for the execution of financial leasing operations.
ü Structured bonds, zero coupon bonds, convertible bonds into shares: these bonds contain a clause, because with it we have the possibility to remedy a certain bond, since it can be capitalized by shares, its strongest is the link to a certain derivative, in addition, It is important to be clear that these bonds are not canceled by coupon but that payment must be waited until the nominal value expiration date so that a well-marked detail can be given because, on some criteria described here it is up to know What is the difference between actions and bonuses
The profitability of a certain bond depends on the knowledge that we have of it, because it is not only important to have knowledge about the future gain, since the possibility of non-payment must be evaluated, because although this may be minimal, there is a margin of risk that we It doubts in a certain way, because we generally invest in a bond in such a way that it can take place until the expiration date, so that we can evaluate from here what is the difference between stocks and bonds.
What is the purpose of the bonds?
Before knowing what the difference between stocks and bonds is, it simply leads us to locate what the objective of the bonds is, since these instruments are financial elements where the issuer agrees to return the capital once the maturity is met, but not only That is because it also cancels interest, since the objective of these instruments is the financing of long-term capital needs by the issuer of the bond.
Risk factors in bonds:
ü Interest rate risk: this is due to changes that may have an impact on the economy that changes the price of the bond in the market.
ü Currency risk: there is a certain risk when receiving amortization payments, or at the exchange rate, which may affect in some way the profitability of said investment.
ü Liquidity irrigation: this makes the possibilities of selling such bonds limited.
ü Inflation risk: it is a rather complicated element, since it is possible that the return on investment is finished.
ü Reinvestment risk: here we are presented with a variation in the interest rate to that of the bond.
ü Risk of default of the issuer: this means that whoever issues the bond simply does not comply with the part of the treaty.
What are the actions?
The shares are simply shares of that company, that is, they are only a portion of a certain company, and are sold in large, medium and small packages.
Types of actions
To know what the difference between stocks and bonds is, it is important to keep in mind that there are several types of actions they are:
ü Participation shares: these are the shares that represent the capital of said company, but are not entitled to vote.
ü Ordinary actions: these actions offer us the possibility of obtaining the right to vote, as well as having economic rights equal to the proportion of social participation.
ü Preferred actions: these actions have the capacity to provide economic preference according to social participation in relation to ordinary shares.
ü Rescueable shares: this type of actions is very interesting, since it refers to actions whose redemption or purchase by parties is through the issuer or third parties and is set at a time according to the conditions of issuance.
ü Non-redeemable shares: these shares may only be redeemed according to a reduction in capital and this is decided at some meeting by the shareholders without the redemption term being set at the time of issuance, as conditions tend to place them Shareholders, as you will see, is a point where knowing what the difference between stocks and bonds is important, since it allows us to have a clearer idea when investing in bonds.
What is a shareholder?
A shareholder is simply a bondholder, in a certain company, he has some attributions and obligations, he has participation in the meetings and even participates in management policies, since he must evaluate the results that generally tend to be positive according to his investment .
ü Right to dividends: a shareholder has the right to receive dividends as part of the distribution of profits, that is, the profits if they have them.
ü Subscription right: it is a right to subscribe in the first place and within the categories according to the holdings, and the capital increase approved through assemblies.
ü Shareholder-partner: this is a holder of ordinary shares whose participation has an active life in the development of the company, and collects all the previous rights regarding the bonds, as this makes it very clear that there are factors that make them different and it is Here where it comes to know What is the difference between stocks and bonds.
Actually, what is the difference between stocks and bonds?
The main difference that we can reflect between the shares and the bonds is undoubtedly in the owner of the assets, since the bonds are usually issued by a government or company and it is about buying a certain debt from an issuer, instead the shares they are simply the obligation that has its purpose as owner to some extent of the assets of a certain company. We can conclude that knowing what is the difference between stocks and bonds is simply a fundamental value in which in one way or another we see interests reflected in our behalf so that we can see them as bonds that generate dividends.
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