How is a stock different from a bond?

A stock represents ownership in a company, which means that when an individual buys a stock, they own a share of that company and are entitled to a portion of its profits, typically through dividends and capital appreciation. This ownership also grants shareholders voting rights, allowing them to have a say in certain corporate decisions.

On the other hand, a bond represents a loan made by an investor to a borrower, typically a corporation or government. When an individual purchases a bond, they are essentially lending money to the issuer in exchange for periodic interest payments and the return of the bond's face value when it matures.

This fundamental distinction between ownership and lending is what sets stocks and bonds apart in the realm of investments. Stocks generally carry more risk due to their fluctuating value and reliance on the company's performance, while bonds tend to offer more predictable returns but do not confer ownership rights. Thus, understanding these differences is crucial for making informed investment choices.