Investing: Advantages And Disadvantages Of Bonds And Common Stocks

Bonds (high grade)

Advantages: Capital safety, Steady income, Narrow price changes
Disadvantages: Fixed dollar return, Fixed dollar redemption

Bonds (medium grade)

Advantages: Greater risk, Fair income security, Wider price changes, Capital appreciation if bought at a discount
Disadvantages: Fixed dollar return, Fixed dollar redemption

Common Stocks (high grade)

Advantages: Hedge against inflation, Some appreciation possible
Disadvantages: Lack fixed income, Fair risk factor, Considerable price changes

Common Stocks (medium grade)

Advantages: Hedge against inflation, Greater appreciation possible
Disadvantages: Lack fixed income, Higher risk factor, Wide price changes

Although this summary is not complete, it furnishes food for reflection. It should be obvious that a choice between bonds (including U. S. Savings Bonds) and common stocks demands careful appraisal of the degree of risk assumed. In addition, the proportion of bonds and stocks in any total proposed investment must be decided. In order to do this we must devise an investment plan that will meet our individual requirements.

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