What are stocks and bonds used for?

Issuing stocks and bonds allows companies or states (through bonds) to acquire new capital. This can be useful for example to invest in new projects.
The shares are included in the equity of the company. Bonds, on the other hand, must be repaid at a certain maturity, because they are third-party funds.

1. What is an action?

A stock is a small part of a business that you buy and therefore own. This is a participation title. Technically, the person who owns a share becomes a shareholder of the company. The latter is thus entitled to a share of the profits of the company and also has the opportunity to participate in the general meeting of the company.

Owning a share confers six main rights:

• Right to dividend: remuneration of the investor;
• Voting rights at general meetings of shareholders;
• Right to information: access to information communicated by the company;
• Distribution right: in the event of liquidation of the company, right to part of the share capital;
• Subscription right: allows a shareholder to have priority in the subscription of new shares in the event of an increase in the share capital;
• Transmission right: the holder can resell his shares on a regulated market.

Dividend refers to the distribution of company profits to shareholders. It is usually distributed once a year and depends on the result of the company. Note that the shareholder receives the dividend without selling his shares, which corresponds to the yield. The income from the share is the possible capital gain and the yield (dividend).

The price of a share is the current value of the share. This is the price at which it can be bought or sold. The course is constantly changing. It is tradable on the financial market, that is to say through the stock exchanges, for example, the New York, London or Frankfurt stock exchanges.

The duration of the action is unlimited (or until the bankruptcy of the company).

2. What is an obligation?
While a share is a title to property, a bond or loan is a debt instrument issued by a company or by a State or Municipality to borrow funds on the financial markets. In return for this participation, the bond holder will earn interest.
Unlike a share, the holder of a bond has no rights in the company. He simply lent his money to the company for a limited time (maturity of a bond).

The coupon designates the payment that the bond holder will receive. The prepayment of interest that companies or governments pay to bondholders is usually annual.

The price or price of a bond is expressed as a percentage of the face value and is often around 100% or, at least, it is between 90% and 110%.
Like stock, it can be bought or sold at any time, at market price. The price also fluctuates every day.

Maturity is the bond’s maturity; it is the bond’s lifetime. It may correspond to the date on which the bond holder is reimbursed the full amount of the par value, i.e. the capital borrowed by the issuer.

Bonds are rated according to quality, duration and yield. There are several rating agencies, the two best known being unquestionably Moody’s and Standard & Poor’s (S&P).

Differences between stocks and bonds from an investor perspective

Investing in bonds is generally safer than investing in stocks. Indeed, debt holders have priority over shareholders. If the company were to go bankrupt, the creditors would be paid off first. The shareholders get the rest.
In such a situation, creditors are usually paid off at least in part, while shareholders can, in the worst case, lose everything.

Who should buy stocks or bonds

It all depends on the investor’s profile. If the client likes the risk, he will choose to buy the shares. On the other hand, less reckless investors will opt more for bonds. Note that it is recommended that you do not invest all your money in the stocks or bonds of a single company. It is preferable to buy securities of several companies or states and also in different sectors of the economy, this reduces the risk of the overall investment.

Source: GBNEWS.CH

This is not in any case a call for the investment