In this episode I explained Stocks, Shares, Dividends and bonds in a simple and entertaining way.
Stocks & Shares
A stock, also known as stock of shares are ownership rights in a particular company or corporation. Such ownership right can be bought and sold, and in some cases owners of a particular stock/shares are entitled to receive dividends.
Stocks are a combination of more than one share or a portfolio of shares, while shares are single unit of ownership in a company.
This a form of payment made to stock or share holders of a particular company/corporation. It’s a way for investors/shareholders to get a proportion of the company’s profit, however, not all companies give dividend on their stock.
Most new companies don’t give dividend on stocks because they prefer to invest the profit and scale up their business. However, large corporations like Microsoft and HP give dividends because they’re well established and have been in operation for over 15 years.
Dividend is paid quarterly i.e. every 3 month in a year (1st, 2nd, 3rd and 4th Quarter). And can either be inform of cash(cash dividend) or stock(Stock split).
These are forms of long-term debt in which the corporation issuing you the bond promises to pay you back the initial capital and a specific interest within a specified period of time. Bonds usually have a low-interest rate and it’s given for a period of 5 to 10 years.
A bond certificate is given upon issuing or loaning the money to the corporation e.g. Government. And you can always tender the certificate to get back your initial capital and interest after the period of the bond elapses.
Comparing Stocks and Bonds
Bonds are less risky and volatile, and you’re more guaranteed to get your initial capital back. Also, you don’t need to have any professional skill set before you can obtain a bond.
Stocks on the other side can be very risky and volatile, and you can end up losing huge sum of your capital if you have wrong entry and exit point. Unlike bonds, stock requires professional skill set, capital and infrastructure before you can successfully venture into it.
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