What's the difference between a stock and a bond?

Ownership vs. lending

When you buy a stock, you own a fractional share of a company. You benefit if the company grows and loses if it shrinks. When you buy a bond, you're lending money to a company or government. They promise to repay you with interest by a set date.

Risk and return

Stocks tend to be riskier and offer higher potential returns. Bonds are typically more stable but pay lower returns. This is why conservative investors hold more bonds; growth-focused investors hold more stocks.

Voting and income

Stockholders may vote on company decisions. Bondholders don't. Stocks may pay dividends (optional company distributions). Bonds pay interest on a fixed schedule, regardless of company performance.