Question 2
When people first begin investing they often ask: 'What's the real difference between stocks and bonds?' A clear analogy is helpful: owning a stock is like owning a slice of a business -- you share in its profits and risks -- while owning a bond is like lending money to that business or a government and getting interest in return. Stocks typically offer higher potential returns but with more price volatility. Bonds tend to be steadier income sources; they pay scheduled interest and return principal at maturity, though bond prices can still move when interest rates or credit risk change. Historically, balanced portfolios combine both asset classes to smooth returns and lower short-term swings. Practically, the choice between stocks and bonds depends on time horizon, risk tolerance, and goals: longer horizons can tolerate stock volatility to chase growth, while shorter horizons often need the relative stability of bonds. This question asks you to pick the concise, accurate difference between the two.
Which of the following most accurately contrasts stocks and bonds?
Did You Also Know...
By Wise Wallet
The Diners Club card (1950) is widely regarded as the first modern consumer charge card.