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RE: Bonds v. Stocks YTD Performance (VTSMX, VGTSX, VBMFX, VTIBX, & VWITX)
What is the difference between a bond and a stock? Which is one id more advisable for a newbie to venture into? Thanks!
What is the difference between a bond and a stock? Which is one id more advisable for a newbie to venture into? Thanks!
A bond is a type of debt whereas a stock is an ownership interest in a company. Bonds tend to be more stable than stocks. Whereas the value of a bond is largely based on the interest it pays out, the value of a stock might be based on the dividends it pays out or the expected future growth of the company. For someone new to investing, mutual funds or index funds are a good place to start as they provide instant diversification. The composition of a portfolio is going to be dependent upon the investors aversion to risk. Typically, investing in stocks is more risky than investing in bonds, but there is more risk where there is more reward. Personally, I recommend opening an account at Vanguard to anyone interested in investing in mutual/index fund. They have the lowest fees in the industry.