Stocks and bonds are two primary types of investments, each with distinct characteristics:

1. Stocks (Equities):

   • Stocks represent ownership in a company. When you buy stocks, you're purchasing a share of ownership in that company.
   • Stockholders have the potential to profit through capital appreciation (the increase in the stock's price over time) and dividends (portion of company profits distributed to shareholders).
   • Stock prices are influenced by various factors such as company performance, market conditions, industry trends, and investor sentiment.
   • Stocks are generally considered riskier than bonds because their prices can fluctuate significantly in the short term. However, they also offer higher potential returns over the long term.

2. Bonds (Fixed-Income Securities):

   • Bonds represent loans made by investors to governments, municipalities, or corporations. When you buy a bond, you're essentially lending money to the issuer in exchange for periodic interest payments and the return of the bond's face value (principal) at maturity.
   • Bonds typically pay a fixed rate of interest (coupon rate) at regular intervals until maturity, at which point the principal is repaid.
   • Bond prices are influenced by interest rates, credit quality, and time to maturity. When interest rates rise, bond prices tend to fall, and vice versa.
   • Bonds are generally considered less risky than stocks because they offer predictable income streams and return of principal at maturity. However, they typically offer lower potential returns compared to stocks.

In summary, stocks offer ownership in a company with the potential for capital appreciation and dividends, while bonds represent debt obligations with fixed interest payments and return of principal. Stocks tend to be more volatile but offer higher long-term returns, while bonds provide income and capital preservation with lower risk. Investors often hold a mix of stocks and bonds in their portfolios to balance risk and return.