So what is the difference between stocks vs. bonds? People today are interested to know what the better method of investing is. Trust be told, many believe that bonds are better because they are a safer investment, as you are virtually assured of achieving a positive return on your investment.
Here is a brief explanation of a bond. The company you hold a bond in has issued you a bond in exchange for your money over a certain time. When the time is up, they will pay the loan back to you with interest. Therefore, as long as the company is financially stable, you can be almost certainly to make that money back.
A stock, on the other hand, is not guaranteed and fluctuates all the time. Therefore, most people believe (in some cases rightfully so) that a bond is a better investment because they are less volatile.
However, here’s something very few investors are aware of: when done right, stock investing can actually be just as guaranteed of giving you a positive return on your investment as a bond, and maybe even more so.
You see, when you focus your investing on companies that have sound financially numbers and good prospects for the future, you can be virtually guaranteed of making money. However, when, like most investors, you try to spread your investments around and include companies on shaky financial ground, you are just asking for trouble.
The reason that so many investors lose money is that they invest in companies without looking at their financial statements. The only reason they invest at all is they think the stock price will be going up short term. Therefore, the first sign up trouble, they sell out.
On the other hand, however, when you focus on sound, stable companies, you are not only assured of making a positive return of investment, but you can make a lot more money than you would with a bond. Warren Buffet is famous for achieving a 15-20% growth rate on his portfolio nearly every single year. This wouldn’t be possible without his strategy to focus on companies he can be assured of will turn a profit.
Therefore, don’t be fooled into only focusing on bonds because they are safer. When you open your eyes, you will actually realize that there are many stocks you can invest in assured of generating you a profit.