{
  "id": 35892,
  "date": "2021-07-28T15:00:00",
  "date_gmt": "2021-07-28T19:00:00",
  "guid": { "rendered": "https:\/\/finance-able.com\/?p=35892" },
  "modified": "2025-12-21T16:56:45",
  "modified_gmt": "2025-12-21T21:56:45",
  "slug": "the-difference-between-stocks-and-bonds",
  "status": "publish",
  "type": "post",
  "link": "https:\/\/finance-able.com\/the-difference-between-stocks-and-bonds\/",
  "title": {
    "rendered": "Difference Between Stocks and Bonds – Ultimate Guide"
  },
  "content": {
    "rendered": "\n<p style=\"font-size:18.5px\">Want to understand the <strong>difference between Stocks and Bonds<\/strong> with <strong>simple, visual, and Plain-English explanations?<\/strong>&nbsp;After reading this article, you will understand:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The <strong>key differences between Stocks and Bonds<\/strong>.<\/li>\n\n\n\n<li>How <strong>Bonds vs Stocks<\/strong> (and <strong>Debt vs Equity<\/strong>) relate to the House you live in.<\/li>\n\n\n\n<li>Why <strong>Houses <\/strong>typically have <strong>one owner and lender<\/strong> but <strong>Businesses<\/strong> <strong>typically <\/strong>have <strong>many Owners and Lenders<\/strong>. <\/li>\n\n\n\n<li>How <strong>Stocks and Bonds <\/strong>are <strong>issued <\/strong>(and then traded).<\/li>\n<\/ul>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-tl-dr\" style=\"font-size:35px\"><strong>TL;DR<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Stocks<\/strong> represent ownership in a Business (aka <strong>Equity<\/strong>).<\/li>\n\n\n\n<li><strong>Bonds<\/strong> represent money lent to a Business (aka <strong>Debt<\/strong>).<\/li>\n\n\n\n<li>Unlike with a House, a <strong>Business <\/strong>has <strong>many owners <\/strong>called <strong>Shareholders<\/strong>.<\/li>\n\n\n\n<li>Unlike with a House, a <strong>Business borrows <\/strong>from <strong>many lenders<\/strong>, called <strong>Bondholders<\/strong>.<\/li>\n\n\n\n<li><strong>Stocks <\/strong>and <strong>Bonds <\/strong>can be <strong>publicly traded, <\/strong>which allows investors to <strong>buy and sell daily<\/strong>. <\/li>\n<\/ul>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"yoast-reading-time__wrapper\"><span class=\"yoast-reading-time__icon\"><svg aria-hidden=\"true\" focusable=\"false\" data-icon=\"clock\" width=\"20\" height=\"20\" fill=\"none\" stroke=\"currentColor\" style=\"display:inline-block;vertical-align:-0.1em\" role=\"img\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 24 24\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M12 8v4l3 3m6-3a9 9 0 11-18 0 9 9 0 0118 0z\"><\/path><\/svg><\/span><span class=\"yoast-reading-time__spacer\" style=\"display:inline-block;width:1em\"><\/span><span class=\"yoast-reading-time__descriptive-text\">Estimated reading time: <\/span><span class=\"yoast-reading-time__reading-time\">1<\/span><span class=\"yoast-reading-time__time-unit\"> minute<\/span><\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-intro-to-the-difference-between-stocks-and-bonds\" style=\"font-size:35px\"><strong>Intro to the Difference Between Stocks and Bonds<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-1024x576.png\" alt=\"An image showing a stick figured working at desk confused about the difference between stocks and bonds\" class=\"wp-image-43256\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/stick-figure-confused-about-difference-between-stocks-and-bonds.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\">When people <strong>first learn <\/strong>about <strong>Finance<\/strong>, they typically <strong>hear<\/strong> about <strong>Stocks<\/strong> and <strong>Bonds<\/strong> <strong>soon after<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Unfortunately<\/strong>, <strong>many <\/strong>go <strong>years into their studies <\/strong>(or work) <strong>before <\/strong>gaining a <strong>full grasp <\/strong>of what <strong>Stocks or Bonds <\/strong>represent. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>In this article<\/strong>, we will provide a <strong>simple, Plain English review<\/strong> of the <strong>difference <\/strong>between <strong>Stocks <\/strong>and <strong>Bonds<\/strong>.<\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n<div class=\"kb-row-layout-wrap kb-row-layout-id35892_f7a267-da alignnone wp-block-kadence-rowlayout\"><div class=\"kt-row-column-wrap kt-has-1-columns kt-row-layout-equal kt-tab-layout-inherit kt-mobile-layout-row kt-row-valign-top\">\n\n<div class=\"wp-block-kadence-column kadence-column35892_82b5f3-70\"><div class=\"kt-inside-inner-col\">\n<h2 class=\"wp-block-heading\" id=\"h-want-to-learn-more-about-finance\" style=\"font-size:35px\"><strong>Want To Learn More About Finance?<\/strong> <\/h2>\n\n\n\n<p style=\"font-size:18px\"><strong>Ramp up faster with all of our (free) deep-dive articles in our<\/strong> <a href=\"https:\/\/finance-able.com\/analyst-starter-kit\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Analyst Starter Kit<\/span><\/strong><\/a>:<\/p>\n\n\n<div class=\" wp-block-kadence-portfoliogrid kb-blocks-portfolio-loop-block alignnone kb-portfolio-loop35892_30d8ec-a2 kb-portfolio-grid-layout-carousel kt-blocks-carousel \"><div class=\" kb-portfolio-grid-layout-carousel-wrap kt-post-grid-layout-carousel-wrap kt-carousel-arrowstyle-whiteondark kt-carousel-dotstyle-dark splide kb-blocks-portfolio-img-hover-zoomout kb-blocks-portfolio-content-hover-zoomin\" data-columns-xxl=\"3\" data-columns-xl=\"3\" data-columns-md=\"3\" data-columns-sm=\"2\" data-columns-xs=\"1\" data-columns-ss=\"1\" data-slider-center-mode=\"false\" data-slider-type=\"carousel\" data-slider-anim-speed=\"400\" data-slider-scroll=\"1\" data-slider-dots=\"true\" data-slider-arrows=\"true\" data-slider-hover-pause=\"false\" data-slider-auto=\"true\" data-slider-center-mode=\"false\" data-slider-speed=\"7000\" data-show-pause-button=\"false\" data-slider-gap=\"30\" data-slider-gap-tablet=\"30\" data-slider-gap-mobile=\"30\" data-slider-gap-unit=\"px\" data-item-selector=\".kb-portfolio-masonry-item\"><div class=\"kadence-splide-slider-init splide__track\"><ul><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:45.138888888889%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"720\" height=\"325\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/08\/Revenue-Run-Rate-lightbulb-1.png\" class=\"attachment-large size-large wp-post-image\" alt=\"The Revenue Run Rate and a lightbulb\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/08\/Revenue-Run-Rate-lightbulb-1.png 720w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/08\/Revenue-Run-Rate-lightbulb-1-300x135.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/08\/Revenue-Run-Rate-lightbulb-1-400x181.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/08\/Revenue-Run-Rate-lightbulb-1-624x282.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/08\/Revenue-Run-Rate-lightbulb-1-50x23.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/08\/Revenue-Run-Rate-lightbulb-1-100x45.png 100w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/revenue-run-rate\/\" aria-label=\"What is a Revenue Run Rate? \u2013 The Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">What is a Revenue Run Rate? \u2013 The Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:45.138888888889%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"720\" height=\"325\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2022\/03\/EBDITA.png\" class=\"attachment-large size-large wp-post-image\" alt=\"\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2022\/03\/EBDITA.png 720w, https:\/\/finance-able.com\/wp-content\/uploads\/2022\/03\/EBDITA-300x135.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2022\/03\/EBDITA-624x282.png 624w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/ebitda\/\" aria-label=\"EBITDA &#8211; Definition, Application, and Pitfalls in Under 10 Minutes\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">EBITDA &#8211; Definition, Application, and Pitfalls in Under 10 Minutes<\/h3><\/div><\/div><\/div><\/div><\/li><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:45.138888888889%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"720\" height=\"325\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/LTM-Revenue-and-EBITDA.png\" class=\"attachment-large size-large wp-post-image\" alt=\"\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/LTM-Revenue-and-EBITDA.png 720w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/LTM-Revenue-and-EBITDA-300x135.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/LTM-Revenue-and-EBITDA-400x181.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/LTM-Revenue-and-EBITDA-624x282.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/LTM-Revenue-and-EBITDA-50x23.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/LTM-Revenue-and-EBITDA-100x45.png 100w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/ltm-revenue\/\" aria-label=\"LTM Revenue (and EBITDA) in 3 Steps \u2013 The Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">LTM Revenue (and EBITDA) in 3 Steps \u2013 The Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><\/ul><\/div><div class=\"clearfix\" style=\"clear:both\"><\/div><\/div><\/div><\/div><\/div>\n\n<\/div><\/div>\n\n\n<div style=\"height:80px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-difference-between-stocks-and-bonds-big-picture\" style=\"font-size:35px\"><strong>The Difference Between Stocks and Bonds: Big Picture <\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Before <\/strong>we <strong>dive into <\/strong>the <strong>deep end<\/strong>, let&#8217;s begin here with a <strong>big picture view <\/strong>of <strong>Stocks versus Bonds<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">Below we identify the <strong>features of Stocks and Bonds<\/strong>:<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n<!-- This site is converting visitors into subscribers and customers with OptinMonster - https:\/\/optinmonster.com :: Campaign Title: Difference Between Stocks and Bonds - Obfuscation -->\n<div id=\"om-mmsvxcnz02tjsjeb8b1o-holder\"><\/div>\n<script>(function(d,u,ac){var s=d.createElement('script');s.type='text\/javascript';s.src='https:\/\/a.omappapi.com\/app\/js\/api.min.js';s.async=true;s.dataset.user=u;s.dataset.campaign=ac;d.getElementsByTagName('head')[0].appendChild(s);})(document,130718,'mmsvxcnz02tjsjeb8b1o');<\/script>\n<!-- \/ OptinMonster -->\n\n\n\n<h3 class=\"wp-block-heading has-text-align-center\" id=\"h-the-difference-between-stocks-and-bonds\" style=\"font-size:26px\"><strong>The Difference Between Stocks and Bonds<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-1024x576.png\" alt=\"A table showing the difference between Stocks and Bonds at a very high level. \" class=\"wp-image-43290\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-stocks-and-bonds-high-level-summary.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">First, <strong>Stocks <\/strong>represent a <strong>unit of Ownership <\/strong>in a <strong>Business<\/strong>, whereas <strong>Bonds <\/strong>are a <strong>unit <\/strong>of a larger amount of <strong>money lent to a Business<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">When you <strong>buy a Stock<\/strong>, you <strong>become <\/strong>an <strong>owner <\/strong>of the underlying <strong>Business <\/strong>and are <strong>entitled to <\/strong>receive your <strong>share <\/strong>of any <strong>distributions <\/strong>(or &#8216;<strong>Dividends<\/strong>&#8216;) paid to owners. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Bonds <\/strong>are <strong>different <\/strong>from Stocks because when you buy a Bond, you <strong>do not gain<\/strong> any <strong>ownership <\/strong>in the <strong>Business<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>As a Lender<\/strong>, you <strong>receive Fixed Interest Payments <\/strong>over the <strong>Bond&#8217;s life<\/strong>. In addition, <strong>at the end <\/strong>of the life of the Bond, you are entitled to <strong>full repayment <\/strong>of the <strong>Face Value <\/strong>(or &#8216;<strong>Principal<\/strong>&#8216;) of the <strong>Bond<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">Finally, <strong>Stocks <\/strong>are a form of &#8216;<strong>Equity<\/strong>&#8216; whereas <strong>Bonds <\/strong>are a form of &#8216;<strong>Debt<\/strong>&#8216;. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>In the rest of this article<\/strong>, we&#8217;ll <strong>dive deep <\/strong>into <strong>how Stocks vs Bonds work<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">We <strong>begin <\/strong>below by <strong>relating <\/strong>both <strong>Stocks and Bonds <\/strong>to the <strong>House you live in<\/strong>. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<p class=\"has-normal-font-size\"><em>Quick Note: We are comparing Corporate Bonds vs Stocks. There are other types of Bonds issued by municipalities, governments, etc. Here we are focused solely on Corporate Bonds. These are great articles on <a href=\"http:\/\/www.projectinvested.com\/investor-guides\/investors-guide-to-municipal-bonds\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Municipal Bonds<\/span><\/strong><\/a> and <a href=\"https:\/\/www.nerdwallet.com\/article\/investing\/how-to-buy-bonds\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Government Bonds<\/span><\/strong><\/a> if that&#8217;s what you are after.<\/em><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-equity-vs-debt-for-a-house-and-a-business\" style=\"font-size:35px\"><strong>Equity vs Debt for a House and a Business<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1400\" height=\"619\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623.png\" alt=\"A table showing the differences between a house that is rented out and a business in terms of equity, debt, lenders, and owners\" class=\"wp-image-35912\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623.png 1400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623-300x133.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623-1024x453.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623-768x340.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623-624x276.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623-50x22.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-12.37.13-AM-e1616546762623-100x44.png 100w\" sizes=\"auto, (max-width: 1400px) 100vw, 1400px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\">Let&#8217;s start with a review of the core concepts of <strong>Equity<\/strong> and <strong>Debt<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">To do that, we\u2019ll use the examples of a <strong>House (Rented Out)<\/strong> and a <strong>Business<\/strong> since they are so similar.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">First, &#8216;<strong>Equity<\/strong>&#8216; is the same as the word &#8216;<strong>Ownership<\/strong>.&#8217; <\/p>\n\n\n\n<p style=\"font-size:18.5px\">In other words, <strong>Equity<\/strong> reflects the Owner&#8217;s value in a <strong>House<\/strong> or <strong>Business<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">This usually consists of <strong>Equity Value in the House or Business<\/strong> (<strong>Total Sale Value <span style=\"text-decoration: underline;\">less<\/span> Borrowings<\/strong>)<strong> plus <\/strong>any<strong> excess Cash<\/strong> from rental income or sales to customers.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">On the other hand, <strong>Debt<\/strong> reflects borrowings made by the owner of a <strong>House<\/strong> or <strong>Business<\/strong>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-stocks-and-bonds-relate-to-your-house\" style=\"font-size:26px\"><strong>How Stocks and Bonds Relate to Your House<\/strong><\/h3>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/house-is-a-business-like-stocks-vs-bonds.gif\" alt=\"An animation showing that house equity vs debt is the same as stocks vs bonds\" class=\"wp-image-43126\"\/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\"><strong>Let\u2019s begin <\/strong>by looking at <strong>Equity<\/strong> and <strong>Debt<\/strong> in the context of a <strong>House<\/strong> that we\u2019ve <strong>rented out<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>When we purchase a House<\/strong>, we typically <strong>borrow <\/strong>some of the <strong>Purchase Price<\/strong> by taking out a <a href=\"https:\/\/www.investopedia.com\/terms\/m\/mortgage.asp\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Mortgage<\/span><\/strong><\/a> on the property.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>As the Buyer<\/strong>, we must <strong>fund <\/strong>the <strong>rest of the purchase <\/strong>by making a <strong>Down Payment<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Contributing <\/strong>the <strong>Down Payment <\/strong>makes us the owner of the House. The amount we\u2019ve invested here is our <strong>Equity<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">As the <strong>House increases in value <\/strong>over time, our <strong>Equity Value <\/strong>in the House <strong>increases<\/strong>. <strong>Equity Value increases<\/strong> because we <strong>could <span class=\"has-inline-color has-black-color\">sell <\/span><\/strong><span class=\"has-inline-color has-black-color\">the House <strong>at a higher price<\/strong><\/span>, <strong>pay <\/strong>off our <strong>debt<\/strong>, and <strong>collect the rest<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>As the Owner<\/strong>, we are also <strong>entitled to <\/strong>any <strong>cash generated <\/strong>by renting out the <strong>House<\/strong>. This <strong>Cash Flow <\/strong>from rent <strong>also increases <\/strong>the <strong>value <\/strong>to us as the <strong>owner<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In short, <strong>Equity Value<\/strong> reflects the underlying <strong>Equity<\/strong> <strong>in the House <\/strong>plus any excess cash from Rent.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Thus far we\u2019ve said that the <strong>Debt<\/strong> and <strong>Equity<\/strong> of a <strong>House<\/strong> and a <strong>Business<\/strong> are nearly the same.  <\/p>\n\n\n\n<p style=\"font-size:18.5px\">However, there&#8217;s <strong>one MAJOR difference <\/strong>between <strong>Debt <\/strong>and <strong>Equity <\/strong>for a <strong>House vs a Business<\/strong>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-debt-and-equity-houses-vs-businesses\" style=\"font-size:26px\"><strong>Debt and Equity (Houses vs Businesses)<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-1024x576.png\" alt=\"Table showing that the key difference between houses and businesses is the number of owners and lenders involved\" class=\"wp-image-43231\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/difference-between-businesses-and-houses-is-number-of-owners-and-lenders.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">The <strong>critical difference <\/strong>between a <strong>House <\/strong>and a <strong>Business <\/strong>is <strong><span style=\"text-decoration: underline;\">the number of Lenders and Investors involved<\/span><\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">With most houses, there is only one <strong>Lender<\/strong> and one <strong>Investor<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">By contrast, <strong>Businesses <\/strong>are typically <strong>much more expensive <\/strong>(vs a House). <\/p>\n\n\n\n<p style=\"font-size:18.5px\">As such, <strong>Businesses <\/strong>break <strong>Equity<\/strong> and <strong>Debt<\/strong> into <strong>smaller pieces <\/strong>to make each <strong>more affordable<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">Because of this, <strong>you can <\/strong>be a <strong>partial lender or owner without buying all <\/strong>of the Company\u2019s <strong>Debt <\/strong>or <strong>Equity<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">Because of this, <strong>Businesses <\/strong>often have <strong><span style=\"text-decoration: underline;\">many<\/span> Lenders <\/strong>and <strong><span style=\"text-decoration: underline;\">many<\/span> Investors<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Let&#8217;s now look at how Equity and Debt work with a Business!<\/strong><\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-from-a-house-to-a-business\" style=\"font-size:26px\"><strong>From a House&#8230;to a Business<\/strong><\/h3>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-and-equity-is-stocks-and-bonds.gif\" alt=\"An animation showing that Lenders contribute Debt as Bonds and Investors Contribute Equity (or Stocks)\" class=\"wp-image-43129\"\/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\">With a <strong>Business,<\/strong> the <strong>same flow <\/strong>of <strong>Equity and Debt funding <\/strong>above also <strong>applies<\/strong>, but with <strong>a few differences<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">First, the <strong>typical Business<\/strong>&#8216;s <strong>Cash Flows <\/strong>are <strong>less stable<\/strong> <strong>than <\/strong>those of a <strong>House<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">As such, we <strong>typically wouldn\u2019t borrow as much<\/strong> of the <strong>Purchase Price<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Also, while the <strong>substance of Equity <\/strong>is the <strong>same<\/strong>, we\u2019d typically call the <strong>Down Payment<\/strong> an &#8216;<strong>Equity Contribution<\/strong>&#8216;.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Similar to the house example, the <strong>Equity Contribution<\/strong> <strong>entitles owners<\/strong> to the <strong>underlying value <\/strong>in the <strong>Business<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Owners <\/strong>are <strong>also entitled <\/strong>to any <strong>excess cash generated <\/strong>by sales to customers.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">But again, the <strong><span style=\"text-decoration: underline;\">big<\/span><\/strong> <strong>difference <\/strong>with a <strong>Business <\/strong>(vs a House) is that the <strong>Purchase Price <\/strong>is <strong>much higher <\/strong>in most cases. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>To make <\/strong>ownership and lending <strong>more approachable<\/strong>, <strong>Businesses<\/strong> break <strong>Debt <\/strong>and <strong>Equity into smaller pieces <\/strong>which are <strong>called <\/strong>&#8216;<strong>Stocks<\/strong>&#8216; and &#8216;<strong>Bonds<\/strong>.&#8217;<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-difference-between-stocks-and-bonds-bonds\" style=\"font-size:35px\"><strong>Difference Between Stocks and Bonds: Bonds<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds.png\" alt=\"An image showing that Debt for a business is broken down into Bonds\" class=\"wp-image-43148\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds.png 1920w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-1536x864.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/business-debt-broken-down-into-bonds-100x56.png 100w\" sizes=\"auto, (max-width: 1920px) 100vw, 1920px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\">A <strong>Business\u2019<\/strong> <strong>Debt<\/strong> usually consists of <strong>Loans<\/strong> or <strong>Bonds<\/strong>. Since <strong>most people <\/strong>are <strong>familiar <\/strong>with <strong>Bonds <\/strong>that they can buy and sell, <strong>we\u2019ll focus <\/strong>on <strong>Bonds <\/strong>here.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-loans-vs-bonds\" style=\"font-size:26px\"><strong>Loans vs Bonds<\/strong><\/h3>\n\n\n\n<p style=\"font-size:18.5px\">But first, <strong>a few quick notes <\/strong>on <strong>Loans<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Loans<\/strong> function the same way as <strong>Bonds<\/strong> function. As with Bonds, there are <strong>often many individual lenders <\/strong>behind a <strong>single loan<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">The <strong>mechanics <\/strong>are <strong>slightly different from Bonds <\/strong>though, and <strong>we will explore <\/strong>the <strong>differences <\/strong>in a <strong>later article<\/strong>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-a-bond-issuance-works\" style=\"font-size:26px\"><strong>How a Bond Issuance Works<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/bonds-issued-in-return-for-principal-and-interest.gif\" alt=\"An animation showing bonds issued to bondholders in return for interest and principal payments\" class=\"wp-image-43138\"\/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">Now back to <strong>Bonds<\/strong>. If a <strong>Business <\/strong>wants to issue <strong>Bonds<\/strong>, they would <strong>typically hire <\/strong>an <a href=\"https:\/\/www.youtube.com\/watch?v=JjjAizGCEFQ&amp;ab_channel=FinanceableTraining\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Investment Bank<\/span><\/strong><\/a> to market the <strong>Bonds<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Investment Banks <\/strong>will <strong>market the Company <\/strong>to large (or &#8216;<strong>Institutional<\/strong>&#8216;) <strong>Lenders <\/strong>who would <strong>buy <\/strong>up the <strong>Bonds<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Even though <\/strong>there are <strong>many Bondholders<\/strong>, <strong>all <\/strong>of their <strong>Bonds<\/strong> <strong>combine <\/strong>into <strong>one unit of Debt <\/strong>from the Company\u2019s perspective.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In return, the <strong>Business<\/strong> must ensure that the <strong>Bondholders<\/strong> receive their <strong>Interest<\/strong> <strong>Payments<\/strong> over the life of the <strong>Bonds<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">The Business must also repay the full &#8216;<strong>Face Value<\/strong>&#8216; (i.e. the amount owed by the <strong>Business<\/strong>) when the <strong>Bond Matures<\/strong>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-bonds-trade-on-the-credit-market\" style=\"font-size:26px\"><strong>How Bonds Trade on the &#8216;Credit&#8217; Market<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/once-issued-bonds-trade-between-buyers-and-sellers.gif\" alt=\"An animation showing that bonds trade among buyers and sellers after they are issued.\" class=\"wp-image-43144\"\/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">Once a <strong>Company <\/strong>raises <strong>Bonds<\/strong>, the <strong>Bonds <\/strong>trade between buyers and sellers on the &#8216;<strong>Bond Market<\/strong>&#8216; (or &#8216;<strong>Credit Market<\/strong>&#8216;).<\/p>\n\n\n\n<p style=\"font-size:18.5px\">It\u2019s worth noting that the <strong>money raised <\/strong>from the <strong>Bonds only flows <\/strong>to the <strong>Business<\/strong> <strong><span style=\"text-decoration: underline;\">one time<\/span><\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">In other words, the <strong>Business receives money <\/strong>right <strong>when <\/strong>it <strong>issues <\/strong>the <strong>Bonds<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>After that <\/strong>point, the <strong>Bonds<\/strong> <strong>simply trade <\/strong>between buyers and sellers on the <strong>Bond market<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>When Bond investors trade <\/strong>back and forth and <strong>no money flows <\/strong>back <strong>to the Company<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Now, let&#8217;s look at how Stocks differ from Bonds<\/strong>.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-difference-between-stocks-and-bonds-stocks\" style=\"font-size:35px\"><strong>Difference Between Stocks and Bonds: Stocks<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1400\" height=\"616\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669.png\" alt=\"An image showing share business ownership breaks down into individual Shares of Stock\" class=\"wp-image-35906\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669.png 1400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669-300x132.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669-1024x451.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669-768x338.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669-624x275.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669-50x22.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.10.30-AM-e1616546910669-100x44.png 100w\" sizes=\"auto, (max-width: 1400px) 100vw, 1400px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\">To <strong>initially fund a private Business<\/strong>, the investors (or &#8216;<a href=\"https:\/\/www.upcounsel.com\/what-does-it-mean-to-be-a-shareholder\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Shareholders<\/strong><\/a>&#8216;) invest through an <strong>Equity Contribution<\/strong> and <strong>gain ownership<\/strong> (or &#8216;<strong>Equity<\/strong>&#8216;)  <strong>proportional <\/strong>to their <strong>investment<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Similar to <strong>Bonds<\/strong>, the <strong>Companies divide <\/strong>the <strong>ownership <\/strong>of a <strong>Business<\/strong> into <strong>smaller <\/strong>(equally sized) units (or &#8216;<strong>Shares<\/strong>&#8216; of &#8216;<strong>Stock<\/strong>&#8216;).<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Owners (or &#8216;<strong>Shareholder<\/strong>s&#8217;) <strong>receive <\/strong>a <strong>share <\/strong>of the <strong>profit distributions <\/strong>(or &#8216;<strong>Dividends<\/strong>&#8216;) of the <strong>Business and <\/strong>any <strong>value <\/strong>if the <strong>Company is ever sold<\/strong>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-a-stock-listing-or-i-p-o-works\" style=\"font-size:26px\"><strong>How a Stock Listing (or I.P.O.) Works<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/a-company-issues-shared-in-an-IPO.gif\" alt=\"An animation showing how a company issues shares of stock in return for dividends and ownership\" class=\"wp-image-43150\"\/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\"><strong>When a Business is privately held<\/strong>, a <strong>Shareholder<\/strong> <strong>must wait <\/strong>until the <strong>Business is sold to sell <\/strong>their shares. <strong>In Finance-speak<\/strong>, these <strong>shares aren\u2019t <\/strong>easily <strong>sellable <\/strong>(or &#8216;<strong>Liquid<\/strong>&#8216;).<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Private ownership<\/strong> like this is standard for <strong><a href=\"https:\/\/finance-able.com\/private-equity-vs-venture-capital\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Private Equity and Venture Capital Funds<\/span><\/a><\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">If a <strong>Company&#8217;s shareholders <\/strong>want to <strong>make their shares <\/strong>&#8216;<strong>Liquid<\/strong>&#8216;, they <strong>can list the Company&#8217;s Shares <\/strong>on <strong>Stock Market <\/strong>in an <strong>Initial Public Offering<\/strong> (<strong>or &#8216;IPO<\/strong>&#8216;). <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>To carry out an IPO<\/strong>, a <strong>Company <\/strong>would hire an <a href=\"https:\/\/finance-able.com\/world-of-finance-4-how-do-investment-banks-operate\/\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Investment Bank<\/span><\/strong><\/a><strong>.<\/strong> <br><br>The <strong>bank <\/strong>would then <strong>market <\/strong>the <strong>Company <\/strong>to Investors. <strong>Once <\/strong>they receive <strong>enough Investor interest<\/strong>, the bank would <strong>list the Company&#8217;s shares <\/strong>on the <strong>Stock Market<\/strong>.  <\/p>\n\n\n\n<p style=\"font-size:18.5px\">As <strong>part of the process<\/strong>, the Company <strong>typically raises new shares <\/strong>(usually to fund growth), which <strong>lowers the ownership <\/strong>of (&#8216;<strong><span class=\"has-inline-color has-vivid-cyan-blue-color\"><a href=\"https:\/\/finance.zacks.com\/dilution-affects-stock-price-6875.html\" target=\"_blank\" rel=\"noreferrer noopener\">Dilutes<\/a><\/span><\/strong>&#8216;) <strong>existing shareholders<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Despite <\/strong>the <strong>dilution<\/strong>, the listing makes the <strong>shares freely tradeable <\/strong>and <strong>injects capital <\/strong>for the <strong>Business <\/strong>to <strong>grow<\/strong>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-stocks-trade-on-the-stock-market\" style=\"font-size:26px\"><strong>How Stocks Trade on the Stock Market<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/how-shares-of-stock-trade-after-they-are-issued-in-IPO.gif\" alt=\"An animation showing how shares of stock trade after they are issued in an IPO\" class=\"wp-image-43154\"\/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Similar to <\/strong>what we saw with <strong>Bond<\/strong>s, the <strong>money raised <\/strong>from selling <strong>Shares<\/strong> <strong>only flows <\/strong>to the <strong>Business<\/strong> <strong><u>one time<\/u><\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">This <strong>occurs <\/strong>right <strong>when <\/strong>the <strong>Shares <\/strong>are <strong>issued <\/strong>to <strong>new Investors <\/strong>in the <strong>Initial Public Offering<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">From <strong>then on<\/strong>, the shares <strong>simply trade <\/strong>on the <strong>Stock Market<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>As <\/strong>the <strong>shares trade <\/strong>between Investors, <strong>no money <\/strong>flows back <strong>to the Company<\/strong>.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-typical-stock-and-bond-investors\" style=\"font-size:35px\"><strong>Typical Stock and Bond Investors<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/07\/hedge-fund-mutual-fund-and-retail-investors-buying-stocks-and-bonds.gif\" alt=\"An animation showing Mutual Fund, Hedge Fund, and Retail Investors buying and selling Stocks and Bonds. \" class=\"wp-image-43241\"\/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Once <\/strong>a <strong>Business publicly lists <\/strong>its <strong>Stocks <\/strong>and <strong>Bonds<\/strong>, <strong>Investors <\/strong>can <strong>buy and sell every day<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">This <strong>includes large investors <\/strong>in both <strong>Stocks <\/strong>and <strong>Bonds, <\/strong>such as <a href=\"https:\/\/finance-able.com\/hedge-fund-vs-mutual-fund\/\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Hedge Funds and Mutual Funds<\/span><\/strong><\/a>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Individual <\/strong>(or &#8216;<strong>Retail<\/strong>&#8216;) <strong>investors <\/strong>also account for a <strong>large proportion <\/strong>of <strong>Stock <\/strong>and <strong>Bond ownership<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">In the end, <strong>investing in Stocks vs Bonds <\/strong>on the <strong>Stock Market <\/strong> (or &#8216;<strong>Equity Market<\/strong>&#8216;) and <strong>Bond Market <\/strong>(or &#8216;Credit Market&#8217;) is a <strong>very similar process for any Investor<\/strong>. <\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-wrap-up-the-difference-between-stocks-and-bonds\" style=\"font-size:35px\"><strong>Wrap-Up: The Difference Between Stocks and Bonds<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1400\" height=\"717\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343.png\" alt=\"A stick figure working on his computer desk with a thought bubble showing Debt and Equity (or Stocks and Bonds) with check marks.\" class=\"wp-image-35903\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343.png 1400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343-300x154.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343-1024x524.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343-768x393.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343-624x320.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343-50x26.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/03\/Screen-Shot-2021-03-20-at-1.44.44-AM-e1616547029343-100x51.png 100w\" sizes=\"auto, (max-width: 1400px) 100vw, 1400px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\"><br><strong>In summary<\/strong>, <strong>Stocks and Bonds differ <\/strong>in that <strong>one reflects ownership <\/strong>(or &#8216;<strong><a href=\"https:\/\/finance-able.com\/enterprise-value-vs-equity-value\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Equity<\/span><\/a><\/strong>&#8216;) and the <strong>other reflects Borrowing <\/strong>(or &#8216;<strong>Debt<\/strong>&#8216;).<\/p>\n\n\n\n<p style=\"font-size:18.5px\">The concepts of <strong>Debt and Equity <\/strong>are <strong>relevant <\/strong>for both <strong>Houses<\/strong> and <strong>Businesses<\/strong> alike. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">However, Businesses typically have <span style=\"text-decoration: underline;\"><strong>MANY<\/strong><\/span> investors who own <strong>Stock<\/strong> and <strong><span style=\"text-decoration: underline;\">MANY<\/span><\/strong> lenders who lend via <strong>Bonds<\/strong> or <strong>Loans<\/strong>.&nbsp;<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>If you continue <\/strong>to <strong>explore <\/strong>the world of <strong>Finance<\/strong>, we <strong>strongly encourage <\/strong>you to <strong>anchor to<\/strong> this <strong>House analogy<\/strong>. <strong>Especially <\/strong>when you get stuck <strong>in an interview<\/strong>! <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>House purchase mechanics <\/strong>are often <strong>easier <\/strong>to think through <strong>than <\/strong>the more <strong>abstract concept <\/strong>of a <strong>Business<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>We hope this article <\/strong>has <strong>helped you <\/strong>to gain a <strong>better grasp <\/strong>of the <strong>difference between Stocks and Bonds <\/strong>(and the related concepts of <strong>Debt <\/strong>and <strong>Equity<\/strong>). <\/p>\n\n\n\n<p><\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Please let us know if you have any comments or questions below!<\/strong><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-stocks-vs-bonds-full-animated-explainer-video\" style=\"font-size:35px\"><strong>Stocks vs Bonds: Full Animated Explainer Video<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>If you enjoyed this article<\/strong>, definitely&nbsp;<strong>check out<\/strong>&nbsp;our full&nbsp;<strong><a href=\"https:\/\/youtu.be\/d_whtPnvqKM\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Animated Explainer Video<\/span><\/a><\/strong>&nbsp;below on the differences between&nbsp;<strong>Hedge Funds<\/strong>&nbsp;and&nbsp;<strong>Mutual Funds<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">You can find more videos just like this on our&nbsp;<a href=\"https:\/\/www.youtube.com\/c\/FinanceableTraining\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">YouTube Channel<\/span><\/strong><\/a>.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-related-links\" style=\"font-size:35px\"><strong>Related Links<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-yoast-seo-related-links yoast-seo-related-links\">\n<li><a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Walk Me Through a DCF in 5 Steps &#8211; The Ultimate Guide (2021)<\/span><\/strong><\/a><\/li>\n\n\n\n<li><strong><a href=\"https:\/\/finance-able.com\/walk-me-through-an-lbo\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Walk Me Through an LBO in 6 Steps \u2013 The Ultimate Guide (2021)<\/span><\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"https:\/\/finance-able.com\/world-of-finance-4-how-do-investment-banks-operate\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">What Is An Investment Bank?<\/span><\/a><\/strong><\/li>\n<\/ul>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-about-the-author\" style=\"font-size:35px\"><strong>About the Author<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"alignleft size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"500\" height=\"500\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo.jpg\" alt=\"Picture of Mike Kimpel, Founder of Finance|able\" class=\"wp-image-26350\" style=\"width:266px;height:266px\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo.jpg 500w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-300x300.jpg 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-100x100.jpg 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-150x150.jpg 150w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-50x50.jpg 50w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:17px\"><a href=\"https:\/\/finance-able.com\/about\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Mike Kimpel<\/span><\/strong><\/a> is the <strong>Founder and CEO<\/strong> of <strong>Finance|able<\/strong>, a next-generation Finance Career Training platform. Mike has worked in <strong><a href=\"https:\/\/finance-able.com\/what-is-an-investment-bank\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Investment Banking<\/span><\/a><\/strong>, Private Equity, Hedge Fund, and Mutual Fund roles during his career.<\/p>\n\n\n\n<p style=\"font-size:17px\">He is an <strong>Adjunct Professor<\/strong> in <strong>Columbia Business School&#8217;s <a href=\"https:\/\/www8.gsb.columbia.edu\/valueinvesting\/coursesfaculty\/valueinvestingprogram\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Value Investing Program<\/span><\/a><\/strong> and leads the Finance track at <a href=\"https:\/\/www.accessdistributed.org\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\"><strong>Access Distributed<\/strong><\/span><\/a>, a non-profit that creates access to top-tier Finance jobs for students at non-target schools from underrepresented backgrounds.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-more-content-related-to-stocks-vs-bonds\" style=\"font-size:35px\"><strong>More Content Related to Stocks vs Bonds<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\">We have created the <strong>ultimate free resource<\/strong> for <strong>aspiring Finance Analysts<\/strong> with our <a href=\"https:\/\/finance-able.com\/analyst-starter-kit\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Finance Analyst Starter Kit<\/span><\/strong><\/a>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>We have <strong>Free, Plain English articles<\/strong> and <strong><span class=\"has-inline-color has-vivid-cyan-blue-color\"><a href=\"https:\/\/www.youtube.com\/playlist?list=PLJ2yVq7yYUT8u1j4SaSdk1tr-3dd62EuV\" target=\"_blank\" rel=\"noreferrer noopener\">Animated Explainer Videos<\/a><\/span><\/strong> on:\n<ul class=\"wp-block-list\">\n<li><strong>Who<\/strong> the <strong>core players<\/strong> (e.g. <strong><a href=\"https:\/\/finance-able.com\/world-of-finance-4-how-do-investment-banks-operate\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Investment Banks<\/span><\/a><\/strong> and <strong><a href=\"https:\/\/finance-able.com\/venture-capital-vs-growth-equity-private-equity\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Private Equity<\/span><\/a><\/strong>) are in the <strong>Finance world<\/strong> and <strong>how they operate<\/strong>.<\/li>\n\n\n\n<li><strong>Core mental frameworks<\/strong> for learning <strong>Valuation<\/strong> and <strong>Returns Analysis<\/strong>.<\/li>\n\n\n\n<li>Reviews of <strong>common trouble topics<\/strong> like <a href=\"https:\/\/finance-able.com\/enterprise-value-vs-equity-value-in-plain-english\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Enterprise Value vs Equity Value<\/span><\/strong><\/a> based on our <strong>experience training thousands of students<\/strong>.<\/li>\n\n\n\n<li>Detailed <strong>walkthroughs<\/strong> of <strong>common Interview Questions<\/strong> like <a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Walk Me Through a DCF<\/span><\/strong><\/a>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n<div class=\"yoast-breadcrumbs\"><span><span><a href=\"https:\/\/finance-able.com\/\">Home<\/a><\/span> \u00bb <span class=\"breadcrumb_last\" aria-current=\"page\">Difference Between Stocks and Bonds &#8211; Ultimate Guide<\/span><\/span><\/div>\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-frequently-asked-questions\" style=\"font-size:35px\"><strong>Frequently Asked Questions<\/strong><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1627495709953\"><strong class=\"schema-faq-question\"><em>What is the difference between stocks and bonds?<\/em><\/strong> <p class=\"schema-faq-answer\"><strong>Stocks <\/strong>represent <strong>ownership <\/strong>(or &#8216;<strong>Equity<\/strong>&#8216;) in a <strong>Business<\/strong>. <strong>Buying a stock entitles <\/strong>the owner to receive <strong>proceeds <\/strong>if the <strong>Business <\/strong>is ever <strong>sold <\/strong>as well as a <strong>proportional share <\/strong>of <strong>cash distributions <\/strong>(or &#8216;<strong>Dividends<\/strong>&#8216;). <br\/><br\/>On the other hand, (Corporate) <strong>Bonds <\/strong>represent a <strong>single unit <\/strong>of a <strong>larger piece <\/strong>of <strong>Debt <\/strong>that has been <strong>lent <\/strong>to a <strong>Company<\/strong>. As an <strong>owner of <\/strong>a <strong>Bond<\/strong>, you <strong>do not have ownership <\/strong>rights. Instead, you <strong>receive fixed Interest Payments <\/strong>and <strong>repayment <\/strong>of the <strong>Bond principal <\/strong>(or &#8216;Face <strong>Value<\/strong>&#8216;) at the <strong>end <\/strong>of the <strong>Bond&#8217;s life<\/strong>. <\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1627495910535\"><strong class=\"schema-faq-question\"><em>What is the difference between shares and bonds?<\/em><\/strong> <p class=\"schema-faq-answer\">A &#8216;<strong>Share<\/strong>&#8216; of &#8216;<strong>Stock<\/strong>&#8216; represents <strong>ownership <\/strong>(or &#8216;<strong>Equity<\/strong>&#8216;) in a <strong>Company<\/strong>. <strong>Buying <\/strong>a single <strong>share <\/strong>entitles the <strong>owner <\/strong>to <strong>receive proceeds <\/strong>if the <strong>Company <\/strong>is ever <strong>sold <\/strong>and a <strong>proportional cut <\/strong>of <strong>cash distributions <\/strong>(or &#8216;<strong>Dividends<\/strong>&#8216;).<br\/><br\/>On the other hand, <strong>Bonds <\/strong>are a <strong>single unit <\/strong>of a <strong>larger piece <\/strong>of <strong>Debt <\/strong>lent to a Company. As an <strong>owner <\/strong>of a <strong>Bond<\/strong>, you <strong>do not own the Business<\/strong>. Rather, you <strong>receive <\/strong>regular <strong>Interest Payments <\/strong>and <strong>repayment <\/strong>of the <strong>Bond principal <\/strong>at the <strong>end <\/strong>of the <strong>Bond&#8217;s life<\/strong>.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1627495995337\"><strong class=\"schema-faq-question\"><em>What is a major difference between Stocks and Bonds?<\/em><\/strong> <p class=\"schema-faq-answer\"><strong>Stocks <\/strong>offer <strong>ownership <\/strong>of a Business and a <strong>share <\/strong>of any <strong>cash distributions <\/strong>(&#8216;<strong>Dividends<\/strong>&#8216;). <br\/><br\/><strong>Bonds <\/strong>offer the <strong>ability to participate <\/strong>in <strong>Lending <\/strong>to a <strong>Business <\/strong>but <strong>no ownership<\/strong>. Instead, the buyer of a Bond receives <strong>Interest <\/strong>and <strong>Principal payments <\/strong>over time. <\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1627496099053\"><strong class=\"schema-faq-question\"><em>What is the largest difference in Stocks and Bonds?<\/em><\/strong> <p class=\"schema-faq-answer\">The <strong>single biggest difference <\/strong>is that <strong>Stocks <\/strong>represent <strong>ownership <\/strong>(or &#8216;<strong>Equity<\/strong>&#8216;) in a <strong>Business <\/strong>whereas a <strong>Bond <\/strong>is simply <strong>Debt<\/strong>.  <\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1627496416093\"><strong class=\"schema-faq-question\">How are Bonds and Stocks similar?<\/strong> <p class=\"schema-faq-answer\">While <strong>Bonds and Stocks <\/strong>have many differences, they are <strong>quite similar <\/strong>in that they are <strong>both<\/strong>:<br\/>1) <strong>Investments <\/strong>that <strong>can generate returns <\/strong>for their Owners.<br\/>2) <strong>Often Publicly Traded <\/strong>so they can be <strong>easily bought and sold<\/strong>.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1627496541987\"><strong class=\"schema-faq-question\"><em>What is the difference between Stocks and Shares?<\/em><\/strong> <p class=\"schema-faq-answer\">&#8216;<strong>Stocks<\/strong>&#8216; and &#8216;<strong>Shares<\/strong>&#8216; are actually <strong>the same thing<\/strong>. <br\/><br\/>When you <strong>buy <\/strong>a <strong>unit of ownership <\/strong>in a <strong>Business <\/strong>(or a &#8216;<strong>Share<\/strong>&#8216;), you are <strong>buying <\/strong>an <strong>individual unit <\/strong>of &#8216;<strong>Stock<\/strong>.&#8217; <br\/><br\/><strong>Each unit entitles <\/strong>the <strong>Owner <\/strong>to a &#8216;<strong>proportional share<\/strong>&#8216; of value in the Business (hence the term &#8216;Share&#8217;) <strong>as well <\/strong>as any 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    "rendered": "<p>Want to understand the difference between Stocks and Bonds with simple, visual, and Plain-English explanations?&nbsp;After reading this article, you will understand: TL;DR Intro to the Difference Between Stocks and Bonds When people first learn about Finance, they typically hear about Stocks and Bonds soon after. Unfortunately, many go years into their studies (or work) before&#8230;<\/p>\n",
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            "text": "<strong>Stocks <\/strong>represent <strong>ownership <\/strong>(or '<strong>Equity<\/strong>') in a <strong>Business<\/strong>. <strong>Buying a stock entitles <\/strong>the owner to receive <strong>proceeds <\/strong>if the <strong>Business <\/strong>is ever <strong>sold <\/strong>as well as a <strong>proportional share <\/strong>of <strong>cash distributions <\/strong>(or '<strong>Dividends<\/strong>'). <br\/><br\/>On the other hand, (Corporate) <strong>Bonds <\/strong>represent a <strong>single unit <\/strong>of a <strong>larger piece <\/strong>of <strong>Debt <\/strong>that has been <strong>lent <\/strong>to a <strong>Company<\/strong>. As an <strong>owner of <\/strong>a <strong>Bond<\/strong>, you <strong>do not have ownership <\/strong>rights. Instead, you <strong>receive fixed Interest Payments <\/strong>and <strong>repayment <\/strong>of the <strong>Bond principal <\/strong>(or 'Face <strong>Value<\/strong>') at the <strong>end <\/strong>of the <strong>Bond's life<\/strong>. ",
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          "name": "What is the difference between shares and bonds?",
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            "text": "A '<strong>Share<\/strong>' of '<strong>Stock<\/strong>' represents <strong>ownership <\/strong>(or '<strong>Equity<\/strong>') in a <strong>Company<\/strong>. <strong>Buying <\/strong>a single <strong>share <\/strong>entitles the <strong>owner <\/strong>to <strong>receive proceeds <\/strong>if the <strong>Company <\/strong>is ever <strong>sold <\/strong>and a <strong>proportional cut <\/strong>of <strong>cash distributions <\/strong>(or '<strong>Dividends<\/strong>').<br\/><br\/>On the other hand, <strong>Bonds <\/strong>are a <strong>single unit <\/strong>of a <strong>larger piece <\/strong>of <strong>Debt <\/strong>lent to a Company. As an <strong>owner <\/strong>of a <strong>Bond<\/strong>, you <strong>do not own the Business<\/strong>. Rather, you <strong>receive <\/strong>regular <strong>Interest Payments <\/strong>and <strong>repayment <\/strong>of the <strong>Bond principal <\/strong>at the <strong>end <\/strong>of the <strong>Bond's life<\/strong>.",
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          "name": "What is a major difference between Stocks and Bonds?",
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            "text": "<strong>Stocks <\/strong>offer <strong>ownership <\/strong>of a Business and a <strong>share <\/strong>of any <strong>cash distributions <\/strong>('<strong>Dividends<\/strong>'). <br\/><br\/><strong>Bonds <\/strong>offer the <strong>ability to participate <\/strong>in <strong>Lending <\/strong>to a <strong>Business <\/strong>but <strong>no ownership<\/strong>. Instead, the buyer of a Bond receives <strong>Interest <\/strong>and <strong>Principal payments <\/strong>over time. ",
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          "name": "What is the largest difference in Stocks and Bonds?",
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            "text": "The <strong>single biggest difference <\/strong>is that <strong>Stocks <\/strong>represent <strong>ownership <\/strong>(or '<strong>Equity<\/strong>') in a <strong>Business <\/strong>whereas a <strong>Bond <\/strong>is simply <strong>Debt<\/strong>.  ",
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          "name": "What is the difference between Stocks and Shares?",
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            "text": "'<strong>Stocks<\/strong>' and '<strong>Shares<\/strong>' are actually <strong>the same thing<\/strong>. <br\/><br\/>When you <strong>buy <\/strong>a <strong>unit of ownership <\/strong>in a <strong>Business <\/strong>(or a '<strong>Share<\/strong>'), you are <strong>buying <\/strong>an <strong>individual unit <\/strong>of '<strong>Stock<\/strong>.' <br\/><br\/><strong>Each unit entitles <\/strong>the <strong>Owner <\/strong>to a '<strong>proportional share<\/strong>' of value in the Business (hence the term 'Share') <strong>as well <\/strong>as any <strong>Cash Dividends<\/strong>. ",
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