Many investors who have aspirations to invest in the financial markets are always at crossroads in choosing whether to invest in bond or stock investment. They tend to evaluate the two based on the potentials gains that each is likely to offer.
Whereas this is a major and an important consideration while evaluating the two, it is important to note that each of them has its own dynamic parameters that will determine the overall success of the portfolio.
As the financial consultants will tell you, there are a number of factors that each individual must take into consideration before investing in either. But as you evaluate the option to go for, here are some insights which you might find useful-:
Richard Cayne Meyer, the CEO of Asia Wealth Group Holdings Ltd, describes that the nature of stock investment is that they are part of ownership of a corporation while bond are loans to corporations. On the earning potential of the two, stocks have theoretically unlimited room for appreciation. This is because the corporation whose stocks you invest in can experience unprecedented growth which will in turn lead to the appreciation of its stocks. This therefore gives the stocks no upper limit in terms of earning potential. But it is important to also remember that the opposite is true.
Bond investment on the other hand happens when the upper limits have already been determined and this will be respected when the bonds are held up to maturity. Due to this, bond investors have no means of growing their investments more than the already predetermined rates. The only lucrative thing with bond investment is that it’s unlikely that the bond value will go down under normal conditions and the investor get less than what they had expected when they made their investments. From this perspective, bond investment is thus more stable and more definite that investing in the stocks.
Levels of risks
Mr. Richard Cayne Meyer explained further that, both investments have specific risks which should also be considered before investing. Stock investment may be said to have no upper limits but they do have a bottom limit. It is possible for the stocks of a company to significantly lose value and become worthless. When this happens, it is a total loss for the investor.
Bonds on the other hands also face a number of risks such as fluctuations in the interest rates markets which might eventually affect the final value of the bond. They also face the effects of inflation in the economy as well as credit risks. For instance, the bond might mature but the issuer becomes unable to make payments or fails to make payments completely, this will lead to devaluation of the bonds thus causing losses to the investors.
Therefore before deciding on which investment to go for, it is imperative that you make a careful analysis and evaluate all the risks involved and determine if you are comfortable with them. Sometimes it might be prudent to seek the opinion of a consultant like Richard Cayne Meyer before making any stock or bond investment.
Richard Cayne Meyer born in Montreal, Quebec Canada resides in Bangkok Thailand and runs the Meyer Group of Companies www.meyerjapan.com. Prior to which he was residing in Tokyo Japan for over 15 years and is currently CEO of Asia Wealth Group Holdings Ltd a London, UK Stock Exchange listed Financial Holdings Company. Richard Cayne has been involved in the wealth management space in Tokyo Japan and has assisted many High Net worth Japanese families create innovative international tax and wealth management planning solutions. https://www.isdx.com/Asia Wealth Group .