B2. Shares vs Bonds

BasisSHARESBONDS
MeaningOwnership of the company and a right to dividendsLending a company/government money with expectation of interest payments
Source of returnsIncrease in Share price
Dividends
Interest Payments
Average returnsHigher than bonds over mid - long term. Returns are limitless based on success of companyLower than shares over mid - long term. Set returns, will not increase.
Is the return guaranteed?NoYes
Level of riskHighMedium
Initial Investment requiredCan start investing with small amountsDepending on broker may require a significant minimum investment
Effect of inflationHigher share priceLower bond price and reduced returns
Effect of currencyHigher share priceLower bond price and reduced returns

About Andrew Kwabena

The Editor of MoneyInAfrica

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