Knowing The Differences In Shares And Bonds, Which Investments Are More Beneficial?

Illustration of the differences in shares and bonds (Unsplash/Wance Paleri)

YOGYAKARTA - Shares and bonds are two investments that are quite popular with young people today. These two investment instruments have several advantages or advantages. However, there are still many people who do not understand the difference in shares and bonds.

You must know the difference between shares and bonds in order to choose the right investment. In general, these two types of investments have the same goal to invest or capital in order to benefit from the company. However, both have differences in terms of ownership. Even bond investment is called the safest investment system.

So novice investors must first know the concept of investing in stocks and bonds. This needs to be understood in order to choose the type of investment that suits the needs of investors.

Shares are direct investments in company ownership. Investors who buy shares of the company, will become owners of some companies or businesses according to the portion or percentage purchased.

The funds or investments you invest in can increase when the business of the company increases. On the other hand, if the business declines, then the value of your shares will also decrease. If businesses make big profits and decide to give some of the money to their owners, you will receive dividends.

Bonds are investments in the form of debt. Bonds are a way for companies and governments to raise funds or loan money from potential shareholders. Usually the form of bonds is a small loan that is given to large entities.

The company or government will provide a debt letter complete with interest and information on the maturity of payment. This letter is proof of the loan agreement for funds and the amount of interest imposed.

After knowing the definition or concept, differences in shares and bonds can be understood easily. The quite basic difference is in terms of ownership or form of investment.

The shares are investments that offer part of the company's ownership to investors. Meanwhile, bonds are in the form of offers to investors to be fund lenders. Here are the differences in shares and bonds that you need to know.

Investment instrument in stocks in the form of equity, namely capital or ownership rights to an asset. While the bond instrument is debt or loan funds.

Shares issued by corporations, could also be issued by joint stock companies. Meanwhile, bonds are issued by public sector authorities, supernational institutions, companies, credit institutions.

The stock investor has the status of an individual who holds shares and is considered part of the company's owner. Meanwhile, investors in the bonds only act as lenders.

Share investors benefit from dividends, but they depend heavily on the company's business conditions. The reason is, shares rely heavily on the performance of issuers. While in bonds, investors receive fixed payments in interest form.

In investing in shares, investors get voting rights in corporate ownership. Meanwhile, in bonds, investors are given priority during payment and liquidation.

The level of risk in stocks is relatively high as investors don't get fixed returns. Meanwhile, bonds have a relatively lower level of risk as most recipients of the loan generate a fixed income. That's why bond investment is called safer.

Share investors may be subject to Dividend Distribution Tax or DDT for their investment returns. Meanwhile, bond investors are not always subject to any tax obligations.

That is the difference between shares and bonds as a fairly popular type of investment in today's era. Each type of investment has its own advantages and disadvantages. The selection of types of investment must be adjusted to your financial needs and principles.

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