What is the difference between bonds and stocks?

Bonds and stocks are both securities that are traded in the financial markets, but they represent very different types of investments.

A bond is a debt security issued by a government, corporation, or other entity that promises to pay the bondholder a specified amount of interest for a set period of time, and to repay the principal amount of the bond at maturity. When an investor buys a bond, they are essentially lending money to the issuer, and in return, they receive regular interest payments and the promise of repayment at a future date.

A stock, on the other hand, represents ownership in a company. When an investor buys a stock, they are buying a share in the ownership of the company, and they may be entitled to a portion of the company's profits in the form of dividends, as well as the potential for capital gains if the value of the stock increases.

In general, bonds are considered to be less risky than stocks, as bondholders have a higher priority claim on the assets of the issuer in the event of bankruptcy or default. However, bonds also typically offer lower potential returns than stocks over the long term.