Basic Investor Guide to Stocks and Bonds

This basic investor guide will look at the ways you can make money with stocks and bonds. Investing in stocks is for those who want to get higher returns and are willing to accept risks. Investing in bonds is for those who want to get higher interest with relatively lower risk compared to stock investing.

Stocks (or shares) represent part ownership in a corporation, and are traded on the stock exchanges. If you want to buy stocks, you must first find a reliable stockbroker and open an account with the brokerage company. Your broker will generally charge a commission when you place the order (buying or selling) for a specified number of shares in a company.

There are two primary ways you can make money with stock investing:
(1) Stock price appreciation: buying stock at a lower price and then selling it at a higher price.
(2) Receive dividends: You will be entitled to dividend payments if you invest in dividend-paying stocks. Most companies pay dividends in the form of cash, while some companies may use stock instead.

When investing in bonds of a corporation you do not gain any kind of ownership rights in the company. In fact, you are the creditors to the company issuing bonds. For instance, you buy a bond with a face value of $1,000, a coupon of 6% p.a., and a maturity of 15 years. This means you will receive a total of $60 ($1,000 * 6%) of interest per annum for the next 15 years. When the bond matures in 15 years, you will receive the $1,000 back.

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