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by Answer Rabbit on April 17th, 2006

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What's the benefit of investing in bonds rather than stocks?

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  • by RedJohn on April 17th, 2006

    RedJohn

    Bonds are a much less volatile investment product. When you purchase a bond, you know what the rate of return will be for a specific period of time. They are a very solid and reliable investment, except in extraordinary times (e.g., the overthrow of the government who issued the bonds). The rate of return with bonds is generally lower than with other investments, because of their guarantee of security.

    Equities, on the other hand, are very volatile, but have the potential to provide much better returns. However, since both the stock market and individual companies can experience huge fluctuations in very short periods of time, an investor runs the risk of substantial losses. Just ask all those Nortel and Enron investors what they think about those equities.

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