Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 1 - Trading Introduction
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 2 - Financial Products
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 3 - Economic Principles
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WHAT ARE BONDS?

Bonds are debt functioning securities unlike stocks which are equity based. This distinction is important to remember as purchasing equity (stock) comes with certain rights whereas when purchasing debt (bonds) an investor becomes a creditor to the corporation or government.

The main advantage of debt over equity is that as a creditor you have a higher claim on assets than shareholders in case of bankruptcy. Bondholders though, do not get profits if a organisation performs well. Through this mechanism bonds are always considered less risky than equities, but this normally goes hand in hand with lower returns on your investment.

The possible risks are explained on the next page…

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