Although, most of these people, seem to believe, they do understand, when, you hear, people, holding income – oriented, investments, questioning growth, and/ or, vice versa, one realizes, it may be helpful, to introduce, some sort of basic – primer, to enhance, knowledge and understanding, in these types of matters. With, that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, some of these basic differences, and hopefully, help people, make wiser choices, for their specific circumstances, etc.
1. Stocks: There are a variety of different types of stock, which usually, fall – into, 2 overall, basic classifications/ categories, either, preferred, or common! One of the key differences is, common stock ownership, grants someone, more participation, in terms of voting, and/ or, decision – making, it, also, carries more risk! Generally, preferred types, have less fluctuation, and grant/ distribute, higher dividends, etc. In addition, some companies, are considered, large – caps, versus, others, which are, small, or medium caps! This has to do, with the total amount of capitalization, and/ or, value, these stocks, maintain, etc. One should also consider, the sector, of a particular corporation, or basic industry. Times change, and, some industries, perform better, than others, after these changes! Some of these investments, are considered, safer, while others, more speculative! Perhaps, the key to understand, is, a stock represents ownership, and shares, either risk, or greater success!
2. Bonds: Unlike owning a stock, bonds represent, debt obligations, of, either, a corporation, and/ or, government entity (municipal/ local; Federal). It is often, defined, as representing, a debt obligation, backed by, either, the full faith, etc. of the backing – entity, and/ or, by a specific revenue flow! Obviously, the former type, are, usually, safer and more secure, while the latter, may pay, a greater dividend rate! Municipal bonds, from the state, you reside, offer tax – free status, both, on the Federal and State levels, while, when, they are. from other areas, only, Federal taxes, are saved. It is also, important, to recognize, that, U.S. Treasury Bonds, Bills, sovereign gold bonds and Notes, although, considered, the safest investment, offer, lower rates, and only are tax – free, in terms of local taxes.
3. Bank interest, versus, corporate dividends: Banks pay interest, while corporations pay dividends! Remember, however, while the F.D.I.C. backs most savings deposits, corporate dividends, are not guaranteed, in most cases! That is a primary reason, corporations generally pay a higher rate of return. Also, recognize, all corporations, are not, the same, and, since, any bond, is backed by the specific company, degree – of – risk, may vary, significantly!
4. Real estate: Investment real estate, when used, in a knowledgeable manner, may offer, the type of overall return, including, tax considerations/ advantages, rent – income, and growth, of, asset value! However, the benefits of this area, often, depend on a variety of factors, while, understanding, it usually, does not offer, the degree of liquidity, other forms, may offer.
Read more – Government Bonds for Senior Citizens
It is important to have the basic knowledge, to permit you, to enhance your chances, of making the most – personally – satisfying, wisest investment decisions, based on a degree of understanding, and hiring the finest professionals, for your circumstances, and needs! The more you know, the better!