Do you like to hit the casino on the weekend, or would you rather spending your money in a more predictable manner?
Your answer matters. In fact, it matters so much that it could potentially classify you as a stock investor or a bond investor. It’s a critical difference between two completely different mindsets that every financial investor should know.
Stocks and bonds are both great ways to ramp up your financial portfolio – but for completely different reasons.
In this part of our bond investments series by contributor Glen Rosenberg, he illustrates the precise difference in people who invest in stocks versus those who invest in bonds. According to Glen, it has to do with one’s mindset.
Is your goal to put money on an up-and-coming industry and take some risk for a potentially large return? Or is it to lend some money and earn back a steady, marginal profit?
If you’re interested in gambling than stock investments are for you. As Glen outlines in the audio above, stocks are essentially a purchase on speculation – there is no guaranteed return. Stocks are an equity position security and investors buy them in hope that their value goes up. For individuals interested in risk-taking – stocks are the investment for them.
But if you’re the type of individual that’s more interested in a consistently passive income, you’re probably more suited for bond investments.
Bonds are a guaranteed income and return – you’re lending money at an interest rate. Even if a given bond’s value decreases during the time a lender holds onto it, the lender is still guaranteed the principle at the end.
So for bond investors, they’re not as concerned with the daily fluctuations of a given bond’s value as are stock investors with the closing bell of the market.
As Glen previously asserted, there is no “silver bullet” investment for any individual. So regardless if an individual is more of a stock investor or more of a bond investor, it’s in their best interested to have a diversified portfolio.
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