Winthrop University: My Money Matters - Investments - Investment Types

Investments

Investment Types

Stocks

Generally speaking, buying stock in a company is essentially investing in the financial health of that company moving forward. If that company grows, expands, and sells more products/ services to society, then your stock in that company is very likely going to rise in value over time. Furthermore, a successful company will often times pay dividends to its shareholders, which are nothing more than cash payments you receive simply for owning stock in the company. That is how you make money as a stockholder: a rising stock value, dividend payments made by the company, or both.

Bonds

A bond investment is a very different animal from a stock investment. While a stock investment flourishes if the company is financially healthy and getting healthier, a bond investment only requires the company to remain financially solvent to achieve its maximum return. You see, when you buy a bond from a company, you are simply loaning your money to the company for some specified period of time. Over that time window, you will receive interest payments on that loan, and then be returned your original investment at the end of the bond’s life. If the company creates some great product and changes the world, it doesn’t benefit you at all. You simply get your interest payments, and nothing more.

Last Updated: 10/5/22