Making Your Own Decisions
February 2, 2012 § Leave a comment
People feel overwhelmed by terminology. Let’s keep things simple.
A ‘stock’ is ownership in a company, a share, of a ‘publically traded’ firm. My company has shares of stock but they are not for sale and my company’s stock is not publically traded on a ‘stock exchange.’
A ‘bond’ is a debt ‘instrument.’ It’s sort of like a mortgage in that there was a financial need and instead of seeking funds from the local federal credit union, the bond issuers seek us to lend them money and they pledge to pay us back our borrowed money with interest. Whether the bond is government bond, from a municipality (to build a hospital or school), or issued by a corporation they may provide a source of cash-flow and possibly less risk that a stock.