Essentials of Borrowing
Stocks Bonds Investing-Which Is Better?
Many investors are looking into stocks and bonds investing for their financial needs. So which is better-stock or bonds for investing? When it comes to this form of investment, it is really all about your personality and individual needs. First of all, bonds are almost always a safe investment, at least when you do so with a reputable company that is making good money. When you take out a bond, you are essentially lending money to the company, in exchange for getting your money back with interest at a certain date. Most of the companies on the stock market are relatively safe in this form of investing. It certainly isn’t 100% guaranteed, especially if the company goes into bankruptcy.
However, you can be reasonably sure of turning a profit. A bond is really best if you want some short term money, in order to make a purchase, preferably within the next couple years. The reason these are great for an upcoming purchase is that you can be almost sure of making money in return. With a stock, you aren’t so sure of making a gain short term. However, when you are investing in stocks the right way, you can be just about guaranteed to make a profit, albeit long term.
Here’s how to do that: first of all, limit your investing to companies that have exhibited a long and profitable history, and eliminate the companies that haven’t. Most investors have the mistaken belief that you can only make a fortune investing in the smaller, riskier stocks. In reality, whenever you invest in these smaller companies, you run a big risk of losing a lot of money, because they haven’t proven they can be successful over the long run. Sure, some of these companies may turn out to be the next Microsoft, but it is very difficult to spot these diamonds in the rough beforehand; you always are at a big risk with newer, unproven companies. Once you’ve limited your search to a specific range of well run companies, then look at the stock price. If the company is selling at a low price relative to it’s overall worth, then invest in it, and hold it for the long term. You wouldn’t want to use this strategy if you need money within the next few years, because short term the market always values companies according to how investors feel about them; however, in the long run, companies are always valued according to their profitability. Therefore, determine what your financial needs are, and make your stocks and bonds investing decision accordingly.
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