Stocks vs. Bonds

Two broad, market-based asset classes with different risk and return characteristics.

This is an educational comparison, not a recommendation. Which option (if any) fits your situation depends on your circumstances — see the key questions in the last row, and discuss them with a qualified professional.

Category	Stocks	Bonds
Purpose	Ownership stake in a company, growth-oriented	Loan to an issuer, income-oriented
Potential return	Historically higher long-term average returns, not guaranteed	Historically more modest returns, not guaranteed
Risk	Higher volatility; value can decline significantly	Generally lower volatility, but subject to interest-rate and credit risk
Liquidity	Generally liquid on public exchanges	Varies — many bonds trade less frequently than stocks
Taxes	Capital gains and qualified dividends taxed per current tax rules	Interest income generally taxed as ordinary income, with some exceptions (e.g., certain municipal bonds)
Fees	Trading/fund fees vary by platform and product	Trading/fund fees vary by platform and product
Guarantees	None	None on price; issuer's promise to pay interest/principal depends on creditworthiness
Complexity	Varies from simple (index funds) to complex (individual stock analysis)	Varies from simple (bond funds) to complex (individual bond analysis)
Time horizon	Often suited to longer time horizons given volatility	Often used for shorter horizons or income stability
Key questions	What is my risk tolerance and time horizon?	How does this bond's credit quality and duration fit my goals?