Differences in Stocks and Bonds and their Benefits

money.teknologmuda.com – There are many types of investment instruments in the capital market. Starting from mutual funds, stocks, and bonds. Most individuals, especially beginners, often can’t stop thinking about what is the difference between stocks and bonds. Although both are investment instruments in the capital market, they are clearly different.

The way to be successful in investing is to understand in advance the type of investment to be chosen and its purpose. Since you don’t know it, you don’t value it, we must recognize the difference between stocks and bonds and understand their, similarities and advantages, how about we go!

Definition of Stocks and Bonds

You must have often heard about stocks and bonds, but do you know what they mean?

1. Stocks

Shares are a type of organizational asset ownership. Shareholders are entitled to organizational profits, which are generally known as dividends. Of course, the value obtained is in accordance with the number of lots of shares claimed.

2. Bonds

Meanwhile, bonds are securities issued by public authorities or companies, accompanied by data on payment maturity and interest.

Bond securities are confirmation of arrangements for obtaining funds, as well as how much interest will be paid by the recipient of the bonds later. Bonds are more often issued by public authorities, although companies can also issue bonds.

Difference Between Stocks and Bonds

1. Publisher or issuing body

The first difference is from the side of the publisher or the publishing body. Shares must be issued by a company that has the status of a public legal entity (Tbk) and is currently listed on the stock exchange. While bonds can be issued by companies and governments.

2. Time of occurrence

The period of validity or the period of time for shares is not limited. As long as you still have confirmation of ownership, the organization is still around and not bankrupt, as long as you have ownership rights to the shares of the organization. Temporarily, the term of the bond is limited, usually having a predetermined period of time.

3. Profit sharing

Profits from shares are dividends taken from the total compensation of the organization. While the benefits of bonds as interest coupons are paid from month to month, obtained from the principal cost plus interest.

4. Investment risk

Stock investing is known as an investment with an extraordinary high risk. To be sure, the cash raised can be plentiful and, surprisingly, more important than bonds, but the risks are perfect too.

Meanwhile, bonds are a good investment. Because just like individuals who owe and are obliged to pay, companies and public authorities are also ‘obligations’ to investors within a certain period of time, and must compensate them as indicated by the time which was not fully determined at the outset. In addition, if the bonds are held by a public authority, the public authority is less prone to default.

5. Taxes imposed

The fifth difference between stocks and bonds is the value of the fees charged. You as a shareholder or investor are burdened because dividends or organizational profits are remembered for money.

However, those costs are naturally cut when investors get dividends. As for the installments of profit bonds, because they are remembered for organizational costs are considered not burdensome.

6. Voting rights over the company

The following differences are organizational democratic rights. In shares, investors have voting rights to decide organizational policies through the General Meeting of Shareholders (GMS), because investors also have an ownership interest.

As for bonds, these are bond securities and you have no rights over the issuer of the bonds, neither organization nor public authority. So you can’t have a say and interfere in their policies.

7. Price fluctuation

Stock prices tend to vary or oscillate, and are sensitive to full-scale and mini-monetary conditions. Meanwhile, security prices were quite stable, affecting financial conditions but sensitive to expansion and interest rates.

Shares and Bonds Equation

1. Valuable letters

Whether you own a stock or a bond, you both own the securities. Both are legal and valid forms of agreement that have been agreed upon by the two assemblies.

If the stock as a certificate of ownership of the organization, while the bonds as bond securities. These two securities can also be exchanged in the capital market for profit.

2. Have a claim on profits and assets

Stocks and investors in addition to having organizational types of ownership and bond securities, they also have claims to profits and assets.

Because these two investment instruments both promise profits for their owners, especially as dividends if shares and interest coupons are paid every month if bonds.

3. Have redemption rights

Not only that, the owners of stocks and bonds also have the right of redemption, this is an option to exchange the shares and bonds owned for money.

Benefits of Investing in Stocks and Bonds

1. A profitable form of investment

Both of these investments clearly have a fairly large cost when compared to ordinary savings. Especially if you have a specific monetary target, stocks and bonds can be ideal decisions for long-term investment.

2. Protect assets from inflation

You are among the losers if you do not invest. Because by investing, you can secure your assets from expansion.

It could be that the Rp one million that is claimed today will have a different value in the next 5 years. If cash is placed in investment instruments such as stocks and bonds, the value of your money will be maintained, it can increase.

3. Contribute to a company and a country

By claiming stocks and bonds, you are also contributing to the progress of the organization and the country. With shares, companies can obtain new sources of subsidies and can maintain business continuity.

As for bonds, especially those issued by public authorities, you also contribute to the betterment of the country. Funds collected from bonds are usually used for projects such as road construction, airports, and so on. When a country needs additional funds, it will usually issue bonds annually.

Which investment should you choose?

Of course, before starting to invest, you should first understand your risk profile and monetary objectives. If you are an aggressive investor, and are trying to face challenges, and invest in the long term, investing in stocks can be an ideal decision.

However, if you’re a conservative investor, and just need to get some steady cash, or are looking for instruments to store for retirement, bonds can be a safe choice.

In addition to bonds, there are other investment instruments that are suitable for conservative investors and can be an option, namely certain deposits. This is because the advantages include stability, higher interest rates than banks, and it is safer to be maintained by the state through LPS.

Such as Neo WOW Deposit from Neo Commerce Bank (Neo Bank). You can start investing from 7 days, up to 1, 3, 6 and 12 months with real deposits starting from IDR 200 thousand. Not only that, the deposit interest offered is also high, ranging from 6.5% pa to 8% per year.

How to make it is also very easy, no need to come to the bank. Everything is enough through a smartphone, because everything should be possible through the center of your hand. What are you waiting for? How about we register now!

PT Bank Neo Commerce Tbk is registered and supervised by OJK and is a participating LPS bank that guarantees deposits for each customer of up to Rp2 billion with the highest interest rate of 3.5%.

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