The Difference Between Stocks and Bonds, Which Is The Safest?

Stock investment may have become a fairly popular investment today. Meanwhile, bond investment was chosen because it is the safest investment. However, do you know the difference between stocks and bonds, apart from the investment concept?

Which investment is the most profitable, stocks or bonds? Instead of being confused, let's find out the difference between stocks and bonds and the advantages of these two investments!

Definition of Stock and Bond Investment

Stock investment is a financial market instrument in the form of a sign of the capital participation of a person or business entity in a company or limited liability company.

The purpose of stock investment is to seek profit or long-term investment. Generally stock investments will be managed by the company, namely managing the assets or capital that you will deposit and usually stock investments also have goals for the future.

If you invest in shares, then you have the right to attend the General Meeting of Shareholders (GMS).

While, bond are debt securities issued by companies, both government and similar companies to shareholders. Generally bonds are also referred to as Securities (SBN).

The definition of bonds is also stated in Law No. 24 of 2022, bonds or government bonds are securities in the form of debt acknowledgments in rupiah and foreign currencies which are guaranteed payment of interest and principal by the Republic of Indonesia in accordance with their validity period.

Difference Between Stocks and Bonds

In general, stock and bond investments have the same goal, namely as a form of investment to gain capital or profit. The difference between stocks and bonds lies in its ownership, usually shares are owned by the company and shareholders will get company profits or often referred to as dividends.

While bonds are securities in the form of debt securities issued by government companies with the concept as a form of borrowing money which will later be repaid as the principal price of the debt with interest which is usually called a coupon.

Bondholders also only have the status of a debtor. Meanwhile, shareholders will have rights to the company's profits as well as voting rights.

The last is that the company issuing shares only issues debt securities that can be purchased, while companies that issue shares can sell part of their ownership to other parties. 

Stock Investment Benefits

After knowing the difference between stocks and bonds, here stock profit what you need to know.

1. Capital Gains

The first advantage of stock investment is capital gain, which is the difference between the selling price and the purchase price. Capital gains also usually come from stock trading activities in the secondary market.

2. Dividend

Stock investment also has advantages in the form of dividends, namely the distribution of profits by the company which of course is also generated by the company itself. The distribution of this dividend must obtain the approval of the shareholders in the GMS.

Dividends given by companies are usually given in the form of cash or stock dividends. Of course, if it is in cash, it is in the form of rupiah. Meanwhile, stock dividends will be in the form of shares which will later be added to the shares owned by investors.

3. Flexible

Investing in stocks can be done anytime and anywhere. Purchases of shares are also mostly done online online from sale to purchase. So it will not interfere with your activities.

Bond Investment Benefits

To be more confident in choosing stock or bond investments, here are some tips:profit or from bond investment which can be considered.

1. Earn Interest (Coupon) Periodically

Bondholders will receive coupons periodically in accordance with the agreed period of time. The coupon value or interest received by the owner of the bond or investment will also vary, depending on the agreement.

2. Has a Higher Profit Than Deposit Interest

The coupon value or interest earned on bonds will usually be higher than the average deposit yield. Thus, the profit obtained will also be maximized.

3. Can be used as collateral

Bonds can be used as collateral or collateral to get a loan from a bank. Not only that, these debt securities can also be used as collateral if you want to buy shares on the stock exchange.

Well, that's the difference between stocks and bonds from the definition, ownership, to the benefits or benefits that you will get. You can choose the type of investment that suits your finances or investment goals. Choose the type of investment that is safe and the most you can try.