So you’re looking for some stocks and bonds investing guidance? The truth is, many people want to know the difference between the two, and which they should focus on.

While you certainly can make much more money in the long run with regular stocks, you shouldn’t over look bonds. In times of a market depression or bear market, bonds certainly can come in handy, as they will give you a far greater return on investment than just sticking your money in the bank. Here are some stocks and bonds investing guidance to help you decide on the best course of action for your portfolio.

Here’s a quick definition of a stock. A stock is simply a security of a company. Every time you purchase more securities, you increase your ownership of the company, and therefore, you stand to benefit (or lose) more, depending on how the company performs.

The unfortunate thing is, most investors don’t think of investing as owning a company; somehow, they separate the stock price from the company itself. Always remember, whenever you invest in a stock, you are investing in the company itself.

Therefore, don’t ever invest in a company just because last year the stock price was at $50, and now it’s at $15. It very well may be that there were never any real profits behind the company, even when the stock was at $50. Remember, short term the stock price is simply a reflection of which stock is receiving the most investing activity. Long term, it always reflects the companies’ overall performance.

If you remember nothing else from this stocks and bonds investing guidance, ask yourself this question: if you were to buy part or all of a particular company, don’t you think you’d take the time to see how profitable it had been in the past, and whether that trend is likely to continue into the future? Yet, so many investors put their money into a firm without ever even glancing at the finances. Don’t ever make this mistake.

The reason that a bond is much safer than a stock is quite simple: when you purchase a bond, you are essentially lending that company money that they will pay you back on with interest at a given date. As long as the company is reasonably successful, they should be able to make due on this promise.

Of course, this isn’t always the case, but generally speaking, bonds are much safer than a stock. No, they don’t offer the profit potential that purchasing stocks do, but in times of a depressed market, a bond can be your best friend. Therefore, follow this stocks and bonds investing guidance, and you will be very profitable with your portfolio.

Filed under: Stock and Bond