What are stocks and bonds?

Stocks are securities that allow investors to have a vested stake in a company proportional to the amount of shares purchased. Bonds are debt instruments in which investors lend money for a specific period of time and interest rate, according to the Securities and Exchange Commission.

Investors purchase stocks for different purposes, mainly for price appreciation, while bond investors desire a fixed income stream. Bonds can be issued by corporations, municipalities and the U.S. government, while stocks are only issued by companies. Both stocks and bonds contain risks. Stocks are subject to price swings, and bonds are subject to inflation risks.