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Gulf News
  • 9 months ago
If you’re looking to diversify your investment portfolio, you’ll surely consider buying some stocks, be it in the UAE or abroad. And if you’re risk-averse, a financial advisor is likely to suggest you invest more in bonds.

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00:00Stocks versus bonds. What's the difference between them and what do you need to know
00:04before you invest in either?
00:07Stocks represent shares in a company. By owning some stocks, by buying stocks, you are becoming
00:11a shareholder. You are owning a part of that company.
00:14Bonds are a form of debt. They are issued by companies or governments in order to raise
00:18money to finance their operations or their expansion plans.
00:21They represent a promise by the issuer, that government or that company, to pay bondholders
00:26a certain amount, a certain interest rate, at a certain time.
00:30Stocks are publicly traded on stock exchanges around the world. They are bought and sold
00:34every day and that can result in some volatility in their prices.
00:38Bonds, however, are not traded in the same way and that's why stocks are generally perceived
00:42as being riskier assets and bonds are being perceived as safer assets.
00:47But even bonds have varying degrees of risks. Bonds issued by the US government, which are
00:51known as treasuries, are considered relatively low risk and that's because of faith in the
00:56US government that it will never default on paying its bondholders.
01:01Another difference is dividends. Stocks will generally pay dividends if the company is
01:05performing well. This means that at the end of each year, on top of the money you're making
01:09trading that stock, the company might give you a little bit of extra cash called dividends.
01:14Bonds, however, don't pay dividends.
01:16Regardless of which asset class you're investing in, be sure to do your research on the company
01:20or the government that you're buying into and be sure to diversify your portfolio.
01:24Happy trading! This is Investing Explained.
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