What are stocks and how do they differ from bonds?

Stocks represent ownership in a company, and when you buy a stock, you own a portion of the company. Stockholders can profit from the company's growth through increases in the stock's price, and some companies also pay dividends to their shareholders. However, stocks are also subject to market volatility and can lose value.

Bonds, on the other hand, represent a loan made by an investor to a company, government, or other entity. When you buy a bond, you are essentially lending money to the issuer. Bonds generally pay a fixed rate of interest, and the principal is repaid when the bond reaches maturity. Bonds are generally considered less risky than stocks, but they also typically offer lower potential returns.

In summary, stocks represent ownership in a company and can offer higher potential returns but are also subject to greater risk and volatility. Bonds represent a loan made to an entity and offer lower potential returns but are generally considered less risky. Both stocks and bonds are important components of a diversified investment portfolio.