How to Invest in Stocks and Bonds

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Stocks and Bonds
Stocks and Bonds (Image: G)

Investing in stock and bonds is a good long term investment. However you must first understand how to invest to avoid losing your hard earned money. This article will guide you in investing in stocks and bonds.

Understand how stocks and bonds work. They are two different type of investments. Stocks represent an equity ownership in the company. Bonds are a debt obligation from the company to you but you are not an owner or shareholder.

Know how you make money with stocks and bonds. With stocks you make money if the company does well and your shares rise in value. If you are a bondholder you receive interest payments and your principal back when the bond matures. There is less volatility in the price of the bond.

Research the company you are considering investing in. There are a lot of free online resources. You can also get company annual reports and financial statements from the company directly.

Open a brokerage account before you invest. There are a lot of low commission online brokers to choose from. If you need more guidance in your investing decisions, you should check with a full service broker. They can provide you with more research and advice, but the commissions will be higher.

Decide what your investment objectives are and plan a portfolio. Once you decide your goals and time frame you will have an idea of how to allocate your investments among stocks and bonds. Generally stocks are for long term growth and bonds are for income.

Tips & Warnings

  • Diversify your investments. The stock and bond market can be volatile. Diversify to reduce your risk. Also only invest what you can afford to lose.
  • You can lose money in both stocks and bonds. Know your risks before investing.

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