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Something that surprised me the most about this topic was that Land Development and Future Contracts will have the highest return percentage, this surprised me because I never really thought about the fact that those were considered to be stocks/bonds. This example is interesting to me because I currently invest my money into a mutual bond and I wanted to expand my knowledge on this topic, I also plan on investing money into stock or bonds in the future. Something that surprised me the most was that that financial debt is one of Canadas best-preforming high-grade bond areas, I found this interesting because I never expected some peoples debt to be other peoples success.

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I decided to pick this picture because it is a quick demonstration that usually the return or outcomes on stocks outweigh return percentages on bonds, but it can also demonstrate that if you put too much into your investments and they fail all of your investments may break and you will lose out.

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A common question among Singaporeans is: will I be able to retire, and which country's GDP must my bank account match to do so? Well common sense dictates the answers are yes (because at age 82, weekly strategy meetings are no longer an option), and France. To help you out a bit, we're going to summarise the age-old issue of property vs stocks vs bonds:

A necessary caveat

There is no "one size fits all" method for retirement planning. Everyone's needs are different. Some of us don't consider retirement adequate until we're lining the bottom of our pool with $1,500 champagne bottles; some of us can retire in a rental flat and eat yong tau foo seven days a week.

Speak to a qualified wealth manager or financial advisor. Somewhere amidst the coma-inducing boredom of their explanations, is the golden ticket to your retirement.

The rundown on property vs stocks vs bonds

Okay, for those of you who are completely allergic to finance, here's a quick rundown:

Stocks, or equities, are shares in a business. Most Singaporeans don't pick their own stocks; it's more common for them to buy into a fund, in which many investors pool their money and a fund manager handles the buying and selling.

It's also quite common for Singaporeans to buy blue chip stocks (stocks in the 30 biggest companies on SGX) via Blue Chip Investment Programmes, which have a minimum cost of just $100 a month (from OCBC or POSB).

Stocks rise or fall in value based on how well the business is doing. Some stocks pay dividends (a share of the company's profits), usually every six months. It's up to the company's directors whether dividends are paid out, and how much.

Bonds were previously the province of rich Singaporeans, because they used to require a minimum of about $250,000. Thanks to the Monetary Authority of Singapore's Seasoning Framework however, there will now be more bonds available for smaller minimums ($1,000). Singapore Saving Bonds (SSBs) are also a common option among some Singaporeans. Bonds are, in essence, loans you give to the bond-issuer. You get paid interest (the bond coupon), and eventually the par value of the bond when it matures.

Property is that thing you live in. Before property, people had to put their stuff in caves or on the ground, and sleep in the rain. In Singapore, which is land scarce, property fetches high values because there's a shortage of room and yet our population is increasing. Of course, this is all a broad assumption; property performs best if you understand the historical values in the area, and can get a sense of its cost versus its rentability. You can check these details on 99.co .

Property versus stocks

Okay, forget the old saying that property always appreciates in the long run. Most of the time, most stocks also appreciate in the long run. Instead, let's look at:

The upside of property

One advantage of property is leverage: you can borrow a lot of money, at super low interest rates. You can't usually borrow $800,000 in cash from a bank at 1.8 per cent interest to buy shares; but that's practically what you get to do when you use it to buy a property. Go figure.

The high amount of leverage means that your returns, when the property appreciates, are also much higher. When your $1.2 million condo inches up in value by just three percent, that's $36,000 in your pocket. Of course, the flip side is also true, as depreciating property also costs you more due to leveraging.

The other advantage is that rental income is more reliable than stock dividends. If you get a decent property in a good location, the rental income will usually at least cover your mortgage repayments. Barring a few exotic cases (such as super high rent units in Sentosa) most property in Singapore doesn't suffer from high vacancy rates.

Property, unlike stocks, also gives you a little more control. You can't really steer a company even if you have shares in it (let's face it, the Annual General Meetings are mainly attended for the cheap buffet). But you can try to raise your property value by making improvements, such as upgrading the flooring, putting in track lighting, banning tenants who listen to Skrillex, etc.

The downside of property

The downside is that property is capital intensive, and illiquid. You can start buying shares for as little as a $100 a month by going through a bank programme. Private property requires a minimum of five per cent of the property price, in cash (more if you have other outstanding property loans).

It's also harder to offload property when it's not performing. You can sell a bunch of shares by clicking a mouse, or touching parts of your phone screen. You can't exactly sell your house on Carousell by next Wednesday.

This means that, in the event of an emergency, stocks provide you with some flexibility. You can cash them out quick to deal with it, whereas your property will take months to sell.

Property also means you need to be more hands-on. Your tenants are going to expect you to fix things, and you'll have to check in on them. You'll also need to factor in maintenance costs, whereas stocks are mainly "buy and forget".

As a final aside, there are property taxes to consider. There is no capital gains tax in Singapore, so the money you make off equities will be untouched. With property, you do have to pay a higher tax. But property tax is not as huge a deal in Singapore as it is in other countries; the taxes are already low, and you can also deduct your mortgage interest and maintenance costs from the tax.

Property versus bonds

Most financial advisors will only recommend switching to bonds as get older. That's because the interest rate on bonds (the coupon) tends to be at around three per cent for most corporate bonds accessible to the public. For government bonds (Singapore Savings Bonds), the rate is around 2.5 per cent per annum.

This is barely enough to keep pace with interest (which is a problem when you're younger, not so much when you're older).

The upside of property

With property, there isn't a fixed limit to how much it can appreciate. Some flats that sold for S$200,000 in the 1970s, for example, might be worth well over S$600,000 in resale value today. Your property appreciates with the times, and keeps pace with inflation (as the cost living rises, you will just raise the selling price of the property or raise the rent).

Bonds, however, are a form of debt. It doesn't matter how well the economy is doing, you can't demand more money out of it. That would be like your bank demanding you pay more for your personal loan because you got a raise.

Bonds are also dependent on the financial health of the bond-issuer. When oil and gas company Swiber defaulted on its bonds last year , it left many bond holders poorer by $250,000 or more. The greatest possible upside to a bond is that you get paid back the agreed-upon amount; the much greater downside is that you might not be repaid at all.

With property, you're not lending money; you have a tangible asset in the form of a house. Even if it underperforms the results tend to be less disastrous.

Bonds also lose out to inflation. With some exceptions (such as inflation-linked bonds, which most Singaporeans don't have much access to anyway), your bond coupon does not rise with the cost of living. In about 40 years, that $500 coupon every year might buy you one used sock from a hobo.

Property prices, however, go up with the cost of living.

The downside of property

Rental incomes fluctuate depending on the market. Bond coupons don't (with the exception of certain types of bonds, such as SSBs). Regardless of whether Singapore's economy is thriving or dying, your bond coupon is unaffected. This can make certain types of bonds, such as perpetual income bonds, a more reliable source of income.

There's also no need to pay tax or maintenance on a bond, which makes it much easier than property.

Property vs stocks vs bonds: Which do you pick?

When comparing property vs stocks vs bonds, the best solution is some of each. Don't rely purely on just one to see you through to your retirement. That means you shouldn't pour every last dollar into the biggest house you can possibly get; rather, buy something that's within a comfortable range, and then set aside your other dollars for a balanced portfolio.

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Property vs stocks vs bonds: Which one should you pick for retirement?

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A common question among Singaporeans is: will I be able to retire, and which country's GDP must my bank account match to do so? Well common sense dictates the answers are yes (because at age 82, weekly strategy meetings are no longer an option), and France.

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I decided to add this picture because it highlights the 4 main types of risks and then breaks down into the sub types of each main risk. This relates to my topic because it is important for someone that is interested in stocks and bonds to learn the different types of financial risks they may face.

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Financial Risk is one of the major concerns of every business across fields and geographies. This is the reason behind Financial Risk Manager FRM Exam gaining huge recognition among financial experts across the globe. FRM is the top most credential offered to risk management professionals worldwide. Financial Risk again is the base concept of FRM Level 1 exam. Before understanding the techniques to control risk and perform risk management, it is very important to realize what risk is and what the types of risks are. Let's discuss different types of risk in this post.

Risk and Types of Risks:

Risk can be referred as the chances of having an unexpected or negative outcome. Any action or activity that leads to loss of any type can be termed as risk. There are different types of risks that a firm might face and needs to overcome. Widely, risks can be classified into three types: Business Risk, Non-Business Risk and Financial Risk.

1. Business Risk: These types of risks are taken by business enterprises themselves in order to maximize shareholder value and profits. As for example: Companies undertake high cost risks in marketing to launch new product in order to gain higher sales.

2. Non- Business Risk: These types of risks are not under the control of firms. Risks that arise out of political and economic imbalances can be termed as non-business risk.

3. Financial Risk: Financial Risk as the term suggests is the risk that involves financial loss to firms. Financial risk generally arises due to instability and losses in the financial market caused by movements in stock prices, currencies, interest rates and more.

Types of Financial Risks:
Financial risk is one of the high-priority risk types for every business. Financial risk is caused due to market movements and market movements can include host of factors. Based on this, financial risk can be classified into various types such as Market Risk, Credit Risk, Liquidity Risk, Operational Risk and Legal Risk.

Market Risk:

This type of risk arises due to movement in prices of financial instrument. Market risk can be classified as Directional Risk and Non - Directional Risk. Directional risk is caused due to movement in stock price, interest rates and more. Non- Directional risk on the other hand can be volatility risks.

Credit Risk:

This type of risk arises when one fails to fulfill their obligations towards their counter parties. Credit risk can be classified into Sovereign Risk and Settlement Risk. Sovereign risk usually arises due to difficult foreign exchange policies. Settlement risk on the other hand arises when one party makes the payment while the other party fails to fulfill the obligations.

Liquidity Risk:

This type of risk arises out of inability to execute transactions. Liquidity risk can be classified into Asset Liquidity Risk and Funding Liquidity Risk. Asset Liquidity risk arises either due to insufficient buyers or insufficient sellers against sell orders and buy orders respectively.

Operational Risk:

This type of risk arises out of operational failures such as mismanagement or technical failures. Operational risk can be classified into Fraud Risk and Model Risk. Fraud risk arises due to lack of controls and Model risk arises due to incorrect model application.

Legal Risk:

This type of financial risk arises out of legal constraints such as lawsuits. Whenever a company needs to face financial loses out of legal proceedings, it is legal risk.

Watch this video on Risk Management Fundamentals

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Financial Risks and Its Types | Simplilearn

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Financial Risk is one of the major concerns of every business across fields and geographies. This is the reason behind Financial Risk Manager FRM Exam gaining huge recognition among financial experts across the globe. FRM is the top most credential offered to risk management professionals worldwide.

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I decided to pick this picture because it demonstrates that your return percentage usually increases with a higher risk percentage. As you can see from the picture future Contracts and Land Development have the highest risk percentages but you will get a higher return. I like this picture because it’s good for people who are just starting out to see their risk and return options.

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This Pin was discovered by Emily Stephans. Discover (and save!) your own Pins on Pinterest.

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This video speaks on stocks VS bonds and what happens to allow you to gain money, I found it interesting that I learned about dividends, I don’t remember reading about them much in the course. This relates to my topic because it is important for people to know the differences.

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This video gave me a quick idea on what the best ways are to invest in regards to stocks and bonds. It has provided me with the info that will help in deciding whether I want to invest more money in one area or if I should evenly distribute my funds. It's very clear in describing the positives and negativities of stocks and bonds also the securities and insecurities.  The video gives the watcher an idea of what their personal risk or reward could be with their age, their financial situation as well as the personality (risk taker) of the investor

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Stocks vs. bonds: How much of each do you need?

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How many stocks vs bonds should you have in your portfolio? The answer is different depending on your age and investment horizon.

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I decided to pick this website because it highlights the differences in stock and bonds and the risks/rewards you will face with both. Something that was useful on this website was that they showed data that stocks usually return 6-7% annually after adjustments. I liked this website because it explains in detail why stocks are considered to be more of a risk than bonds, allowing someone who is looking into investments to gather ideas of which to pick.

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Comparison chart

Bond

Stock

Meaning

In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest

In financial markets, stock capital raised by a corporation or joint-stock company through the issuance and distribution of shares

Centralization

Bonds markets, unlike stock or share markets, often do not have a centralized exchange or trading system

Stock or share markets, have a centralized exchange or trading system

What Are Stocks?

Stocks, or shares, are units of equity - or ownership stake - in a company. The value of a company is the total value of all outstanding stock of the company. The price of a share is simply the value of the company - also called market capitalization, or market cap - divided by the number of shares outstanding.

Stocks of a company are offered at the time of an IPO (Initial Public Offering) or later equity sales. Stocks are usually traded on exchanges like the BSE and NSE in India or the NASDAQ and the New York Stock Exchange, which offer great liquidity (i.e., the ability to convert investments into cash as soon as one needs to).

What Are Bonds?

Bonds are simply loans made to an organization. They are a form of debt and appear as liabilities in the organization's balance sheet. While stocks are usually offered only in for-profit corporations, any organization can issue bonds. Indeed, the governments of United States and Japan are among the largest issuers of bonds. Bonds are also traded on exchanges but often have a lower volume of transactions than stocks.

Types of Stocks and Bonds

There are many different kinds of stocks and bonds to choose from, some of which make for more sound investments than others.

Types of Stocks

Stocks fall under two main categories, common stock and preferred stock, and preferred stock is further divided into non-participating and participating stock. The vast majority of investors only buy and sell common stock. Under it, it is easiest to think of stock types according to several primary factors. Good, diversified portfolios include a variety of different types of companies' stocks.

Stocks by size: There are small, medium, and large companies one can invest in. When discussing stocks, they are usually referred to as small-cap (as in market capital), mid-cap, and large-cap companies. Small-cap companies have a market capitalization of $300 million to $2 billion. For mid-cap companies, it's between $2 and $10 billion. Large-cap, or big-cap, companies have a market capitalization above $10 billion. Large-cap companies are usually the most stable; small- and mid-cap companies are considered comparatively riskier to invest in but might offer a better return because of their growth potential.

Stocks by sector: Another way to think of stocks is by sector. Those who care a lot about information technology or some other sector might want to devote a percentage of their investment portfolio to such companies. Standard & Poor's (i.e., the S&P500) organizes stocks it follows into 10 major sectors and even more industries, making it easy to do this (see the Global Industry Classification Standard or this list of S&P 500 companies). When investing by sector, it is important to invest in a variety of sectors and industries to lower risk.

Stocks by growth: Some stocks are rapid growers and have the potential to give a good return, but they can be risky; these are growth stocks. Value stocks are those that are more stable within the market and are likely to give some return overall but are not as likely to have major spikes or dips in value.

Stocks by region: It is possible to invest in local and overseas markets. Investing in an international fund will allow one to put money into stable markets (e.g., Western Europe's), riskier emerging markets (e.g., Latin America's), or a combination of both.

Index funds: If picking and choosing stocks by the above factors seems overwhelming or like it is too much trouble, index funds can be a good investment alternative. The NASDAQ-100 is an example of a stock index; in its case, it lists the top 100 large-cap stocks in the NASDAQ. When an investor puts his or her money in a NASDAQ-100 index fund, the money is evenly divided between all the stocks within the fund. The idea behind an index fund is that, on the whole, the entire index will grow and produce a return, though some stocks within the fund may decrease in value. Compared to some other methods, especially for inexperienced investors, index funds can be a relatively low-risk way to invest in the stock market.

Types of Bonds

The bond market, which is also sometimes known as the debt or credit market, allows investors to issue new debt in what is known as the primary market and buy and sell debt securities in the secondary market.

Government bonds: Bondholders of government bonds are loaning money to a government. Provided the government one invests in does not default on this type of loan (unlikely in established nations), the principal of a bond is paid back in full over time, with interest. In the U.S., there are several types of government bonds, known as "treasury securities." The main three - treasury bills, treasury notes, and treasury bonds - mature at different rates and pay interest in different ways; they require a minimum investment of $100. Other types of government bonds may be cheaper to buy but tend to result in a lower return. There are also floating-rate notes that offer a variable rate of interest according to the market. Finally, it is possible to invest in other countries' bond markets. Investing in established countries is very safe but unlikely to yield a significant return, while investing in developing countries is risky but could prove profitable.

Municipal bonds (a.k.a., "munis"): The word "municipal" relates to smaller, local governments, like those which govern towns, counties, cities, or states - i.e., not national/federal governments. Just as investors can loan money to federal governments, so, too, can they loan money to local governments, usually to help fund specific public projects, like water/sewage upgrades, hospitals, schools, etc. While many local governments around the world issue municipal bonds, the U.S. municipal bond market is the largest and is considered to be one of the safest.

Corporate bonds: As the name suggests, corporate bonds are where investors loan money to corporations. They make for riskier investments than government and municipal bonds, but the potential returns are much higher. To avoid investing in high-risk corporate bonds, investors use bond ratings provided by organizations like Standard & Poor's and Fitch Ratings. Bond ratings are what they sound like: they rate the creditworthiness of a corporation.

Zero-coupon bonds (a.k.a., accrual bonds): These bonds are often sold at a discount and have a fixed interest rate that only pays out upon bond maturity. In other words, there are no periodic interest payments from these bonds; instead, the interest accrues, or builds up, over time. While these can make for a good investment, there are drawbacks in terms of how they are taxed.

Stocks and Bonds to Avoid

Penny/cent stocks: The U.S. Securities and Exchange Commission (SEC) defines a penny stock as generally being "a security issued by a very small company that trades at less than $5 per share." These stocks are not traded on major stock exchanges and may be very difficult to sell once owned. It is relatively easy for one to lose all of the money he or she invests in penny stocks.

Junk bonds: This is the name given to high-risk bonds from companies (or governments) that receive lower bond ratings and have a greater chance of defaulting. Junk bonds should generally be avoided by most investors, as there is a very good chance that one will see no return and perhaps even lose money. However, some more aggressive investors still choose to occasionally invest in them.[1]

How Are Stocks and Bonds Valued?

The price of a stock is determined by what buyers and sellers on the exchange are willing to pay/accept on any given day. In general, the value of a company is determined by the value of its assets (minus liabilities), along with the net present value of all future earnings. A key factor in determining value is the expectation of growth. If investors expect a company to grow very fast in the future, they may value the company highly even if it is currently a loss-making enterprise. Companies like Twitter and Amazon are examples of cases where the current earnings may be small - or even negative, i.e., losses - but the value of the company's assets (such as intellectual property, its customer base, brand, goodwill, and other intangibles) and the expectation of future growth is so high that the company is valued at billions of dollars.

Every investor has her own opinion of the value of the company. Share price reflects a sort of consensus opinion of the market.

With bonds, prices are determined based on how ratings companies, like S&P and Fitch, rate the creditworthiness of the issuer of the bond. For example, a corporate bond issued by Apple is rated AAA, which means the ratings agency has very high confidence in the ability of Apple to repay its loan, the bond debt that the bondholders own. The likelihood that Apple will default on its loans is very low, so the company can borrow at very low interest rates (say, 2%).

Bond Yields vs. Prices

A confusing element of bonds is that they have two types of valuations, a daily value, price, on the bond market, where bonds can be bought and sold, and a long-term return value, yield (or, more often, yield to maturity), where investors earn back the principal cost of the bond, plus interest, plus/minus any gains or losses.

Bond prices have a unique relationship with bond yields. Specifically, when the price of a bond goes up on the bond market, the yield of that bond decreases; or when a price decreases, a yield increases. For more vigilant and active investors, both concepts are useful. To see an example of how prices and yields relate to one another, watch the video below.

External Factors

Factors external to the organization also affect the price of its shares and bonds. For example, when the economy is weak and stagnating, all share prices tend to fall because the expected value of future earnings is lower. Conversely, when the economy is growing, and unemployment is low, investors are more confident.

Another factor is money supply. When interest rates are lowered - like, the Federal Reserve did in the aftermath of the 2008 financial crisis - two things happen that inflate share prices:

1. There is more money in the financial system. More money in circulation increases inflation and fuels a rise in share prices.

2. "Safer" options to invest money in debt (bonds) become less lucrative when interest rates fall. So investors choose stocks to chase higher returns.

Building a Portfolio

Risk and Performance

In general, stocks are considered riskier and more volatile than bonds. However, stocks are also believed to offer a higher return compared with bonds. This chart compares the returns from stocks vs. bonds over a 10 year period and represents the conventional thinking around stock vs. bond performance:

A big caveat to a chart like this is that it can look very different depending upon the time period. For example, if the 10-year chart were to end in 2008 then the total return for stocks may well have been negative.

It is important to understand that stocks are often very long-term investments (10+ years), usually for retirement purposes. In any given year, a stock can have steep highs and deep lows as its value is redefined again and again on the market, making frequent buying and selling extremely risky and mostly inadvisable. Over time, though, stocks tend to return 6-7% annually, on average, after adjusting for inflation and dividends.

Bonds are also used for retirement savings, but shorter-termed bonds - those which mature within 10 years or fewer - can just as easily be used throughout a lifetime for small, periodic returns. Long-term (e.g., 30-year) U.S. Treasury bonds usually have a return of around 3-4%.

Allocation

First-time investors often want to know how much money they should allocate to stocks and how much they should allocate to bonds. The answer is it depends. What it depends on is risk tolerance, which changes with age; ability and know-how when it comes to risk-taking strategies; and how much liquidity is needed. There are numerous strategies one can use to invest:

Simple approaches: John Bogle, of Bogleheads fame and the founder of the Vanguard Group, recommends a simple approach to investing, wherein one invests in two index funds, a U.S. total market index fund and a U.S. total bond market fund. Investing in a third group of international stocks or bonds is also often recommended. This easily makes stock investment a near "set it and forget it" sort of experience. See also ETF vs Mutual Fund.

More complex approaches: Younger people can take on more risk than older people because they have time to recoup any significant losses. Some advocate that those who are younger should take greater risks and invest much more in the stock market than in bonds, while those who are older should cut down on their risks and invest more in bonds and stocks that are thought to be safer, though stocks should still make up the majority of a portfolio. Some also recommend investing small amounts in real estate (REIT).

Diversifying Stock and Bond Portfolios

Diversification reduces risk.[5] Those who decide to invest manually in the stock market, rather than use index funds, must learn to diversify their portfolios themselves. Just because an investor is interested in or knows a lot about the energy industry does not mean he or she should only invest in it. A person who only owns stock in one company or industry is at much greater risk of losing money than a person who invests in multiple companies and industries and different kinds of bonds. The investor should buy a wide variety of stocks and bonds using some of the factors listed above.

Investment Tools and Fees

When it comes to investing, the old adage is somewhat true: one has to have money to make money. Investing a small amount in a single company is less wise than saving up and then investing a larger amount in index funds or across several types of companies and bonds; most brokerage accounts require at least $500 to start.

First-time investors should also be prepared for fees. Brokerage accounts charge account fees and/or trading fees. Others have different business models that charge flat percentage fees.

Some common investment tools and trackers include the following:

Several other comparisons are relevant to the buying and selling of stock: Ask Price vs Bid Price, Call Option vs Put Option, Futures vs Options, Forward Contract vs Futures Contract, Limit Order vs Stop Order, and Naked Short Selling vs Short Selling.

Shareholders vs. Bondholders

Shareholders have different investment rights from bondholders. As part owners of a company, shareholders get a say in how a company is run, while bondholders, as lenders, have no say in how governments or corporations manage themselves or their loan. In the case of a company liquidating, however, bondholders come out on top, with their investment receiving priority over shareholders' investments.[6]

Voting Rights

A benefit of owning stock is the ability to participate in companies' affairs. Shareholders have the right to look at a company's records, attend (or listen to) annual meetings about company performance, receive a cut of all declared dividends, participate in electing directors to the board, and sue the corporation for any infringing behavior.[7] There is really no eqvuivalent set of rights for bondholders.

Those with a large stake in a company will often take advantage of their rights as shareholders to help guide a company toward (hopefully) more growth. For example, voting rights are especially important, as a company's board of directors greatly affects how well a company will perform in the future.

Liquidation and Bankruptcy

Sometimes companies fail and have to close down or reorganize. When this happens, they may begin a process of liquidation - that is, selling assets to pay off debts - which is part of Chapter 7 bankruptcy in the U.S. Debts are always paid off first, meaning bondholders have an advantage over shareholders when it comes to liquidation. Shareholders receive any money that is left over from debt repayment, which may not be any at all. This is one of the biggest reasons bond investments are safer than stock investments.

Different types of bankruptcy, such as Chapter 11, affect bondholders and shareholders in different ways than the above, but generally bondholders come out on top when compared to shareholders. Neither are very likely to get back all of their investment, however, which proves yet again the importance of careful investment.

How Stocks and Bonds Are Taxed

Different types of stocks and bonds are taxed differently. In some cases, even, one state may tax interest than another does not. Sometimes federal taxes apply, and other times they do not.

In general, though, the following is true for bond taxation:

Interest earned from U.S. Treasury bonds and savings bonds - i.e., federal government bonds - is only taxed at the federal level. State and local governments do not tax this money.

Corporate bond earnings are taxed at every level. They are taxed the most of all bonds because their returns are usually the highest.

Earnings gained from municipal bonds are taxed in a complicated fashion. Sometimes federal, state, and local taxes apply; other times, none apply. For a thorough explanation of how municipal bonds are taxed, see this Investopedia article.

Though zero-coupon bonds do not pay out interest over time, but rather accrue it until bond maturity, federal, state, and local taxes apply to this interest that is sometimes called "phantom" interest.[8]

And what follows here is generally true for stock taxation:

Stocks that are sold within a year of their purchase are subject to short-term capital gains taxes - that is, whatever the investor's normal income tax rate is.

It is better to hold on to stocks for at least a year before selling, as earnings then are subject to long-term capital gains. For those whose income is taxed at 10-15%, the long-term capital gains tax is 0%.[9]

Any earnings from stock dividends are also taxable. They are taxed in the same way that the bought and sold stocks are. In other words, dividends earned from a long-held stock are more lightly taxed than those earned from a recently-owned stock.

References

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What's the difference between Bond and Stock? Stocks and bonds are the two main classes of assets investors use in their portfolios. Stocks offer an ownership stake in a company, while bonds are akin to loans made to a company (a corporate bond) or other organization (like the U.S. Treasury).

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I picked this website because it focuses on risks of bonds, I thought that it would be good for people that were interested in bods compared to stocks. One thing that I found interesting is that credit risk is one of the last risks to worry about when it comes to bonds, I would have assumed it would be one of the firsts. I also found it interesting that bond laddering is a way to manage risks, compared to only diversification.

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4 common risks for bond investors

1. Interest rate risk

2. Inflation risk

3. Market risk

This is the risk that the entire bond market declines. If this happens, the price of your bond investments will likely fall regardless of the quality or type of bonds you hold. If you need to sell a bond before its maturity date, you may end up selling it for less than you paid for it.

4. Credit risk

Learn more about the factors that affect bond prices.

Assessing bond risk

You can learn about the credit risk of different bonds from a credit rating agency like DBRS, Fitch, Moody's or Standard & Poor's. These agencies rate the issuer's ability - in the agency's opinion - to make regular interest payments and to pay investors back when the bond matures.

Canadian federal and provincial bonds generally have low credit risk. You'll likely get a lower on these bonds, but there's little chance the issuer will default on a payment. The bonds with the highest credit risk are high-yield bonds, issued by companies with low credit ratings. They pay higher interest, but there's a higher risk you won't receive any interest payments or get back your original investment.

All other things being equal, longer-term Term The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest. + read full definition bonds tend to have higher returns and higher risk than shorter-term bonds. That's because the longer you hold a bond, the more it could be affected by changes in interest rates, inflation and market declines.

2 ways to manage risk

1. Bond laddering

2. Diversification

By choosing a mix of bonds with different features, you'll increase the chance that some of your bonds will perform well at times when others do not. Consider buying a mix of bonds that fit with your financial goals and tolerance for risk. This could include a mix of government and corporate bonds, bonds that mature at different times, or more complex bonds like strip bonds or .

4 key points

Common risks of investing in bonds:

1. Interest rate risk

2. Inflation risk

3. Market risk Market risk The risk of investments declining in value because of economic developments or other events that affect the entire market. The main types of market risk are equity risk, interest rate risk and currency risk. + read full definition

4. Credit risk

Take action

Reduce bond risk by:

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Risks of bonds | Bonds | GetSmarterAboutMoney.ca

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This is the risk that the entire bond market declines. If this happens, the price of your bond investments will likely fall regardless of the quality or type of bonds you hold. If you need to sell a bond before its maturity date, you may end up selling it for less than you paid for it.

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This website solely focuses on the risks of investing in Stocks, this relates to the topic because when people are investing they want to see what they are getting into. I found it interesting that there are systematic risks which is a chance that the whole market may decline and unsystematic risks which is when one stock may go down in value compared to the whole. On this webpage you will learn what to take into account when investing and some risk measures you can take into account.

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Here are some risks associated with investing in the stock markets: One of the concepts used in risk and return calculations is

- also known as market risk, this is the potential for the entire market to decline. Systematic risk cannot be diversified away.

- the risk that any one stock may go down in value, independent of the stock market as a whole. This risk may be minimized through diversification. This also incorporates business risk and event risk, as described in the "Bond Risks" section.

Other risks - opportunity risk and liquidity risk (as described in the "Bond Risks" section) may also apply to stocks in a portfolio.

Quantitative Analysis
standard deviation, which measures the dispersion of actual returns around the expected return of an investment. Since standard deviation is the square root of the variance, this is another crucial concept to know. The variance is calculated by weighting each possible dispersion by its relative probability (take the difference between the actual return and the expected return, then square the number).
The standard deviation of an investment's expected return is considered a basic measure of risk. If two potential investments had the same expected return, the one with the lower standard deviation would be considered to have less potential risk.

Standard deviation takes into account both systematic risk and unsystematic risk and is considered to be a measure of an investment's total risk.

There are three other risk measures used to predict volatility and return:

- measures stock-price volatility based solely on general market movements. Beta is a relative measure of systematic risk. Typically, the market as a whole is assigned a beta of 1.0. So, a stock or a portfolio with a beta higher than 1.0 is predicted to have a higher risk, and potentially, a higher return than the market. Conversely, if a stock (or fund) had a beta of 0.85, this would indicate that if the market increased by 10%, this stock (or fund) would likely return only 8.5%. However, if the market dropped 10%, this stock would likely drop only 8.5%.

- measures stock-price volatility based on the specific characteristics of the particular security. As with beta, the higher the number, the higher the risk.

- a more complex measure that uses the standard deviation of a stock or portfolio to measure volatility. It is a measure of risk-adjusted return. This calculation measures the incremental reward of assuming incremental risk. The larger the Sharpe ratio, the greater the potential return. The formula is: Sharpe Ratio = (total return minus the risk-free rate of return) divided by the standard deviation of the portfolio.

Look Out!
Of course, the reverse of "the larger the Sharpe ratio, the greater the return," is that the lower the ratio, the lower the potential return. If a security\'s Sharpe ratio were equal to "0", there would be no reward for taking on the higher risk, and the investor would be better off simply holding Treasuries (whose return is equal to the risk-free return component of the equation).
Risk-Reduction Strategies for Stocks

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Here are some risks associated with investing in the stock markets: One of the concepts used in risk and return calculations is - also known as market risk, this is the potential for the entire market to decline. Systematic risk cannot be diversified away.

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This website highlights some of the best bonds to being Canadas financial sector, I found it interesting that financial debt is one of Canadas best-preforming high-grade bond areas. This relates to my topic because it is important for people to know the best sectors to invest in and know the return that people are receiving, as the website highlights most investors receive 2.8% return for the first 8 months of the year,

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The bond market still considers Canada's financial sector one of the safest havens from turmoil even as bank stocks face their worst losses in 16 years.

Financial debt is among Canada's best-performing high-grade bond sectors in a year when plunging commodity prices and slowing global growth stoked volatility and pushed the nation's economy back into recession. Debt of Canadian banks, which ranked as the world's soundest for seven straight years by the World Economic Forum, is on pace to outperform equities for the first time since 2011 as investors clamor for high-quality securities.

"Stocks thrive on outright success and bonds succeed on viability," said Eric Lascelles, chief economist at Royal Bank of Canada's RBC Global Asset Management unit. "The Canadian banking sector is certainly still viable and so the bonds are doing just fine; success is a question given some of the headwinds."

Investors holding debt of Toronto-Dominion Bank, Royal Bank and other Canadian lenders had total returns averaging 2.3 percent for the first eight months of the year, according to Bloomberg Canadian Dollar Investment Grade Corporate Bond Index data. That contrasts with Canadian bank stocks, which had their worst performance to Aug. 31 since 1999, with the eight-company Standard & Poor's/TSX Commercial Banks Index losing 5.6 percent with dividends for the period.
'Very Stable'
The broader financial sector -- which includes debt of banks as well as institutions such as insurers and real-estate investment trusts -- has posted a 2.4-per-cent total return, according to index data. Consumer staples, which includes health care services, food, and commercial services companies, returned 2.7 per cent. The index's basic-materials bonds, all from uranium producer Cameco Corp., returned 4 per cent.

"The Canadian financials are still hanging in there pretty well," said David Beattie, senior vice president at Moody's Investors Service in Toronto. "They're very highly rated, very stable organizations that are well-managed, and they've seen these cycles before."

Canadian banks are among the world's top-rated financial firms, led by Toronto-Dominion's Aa1 rating from Moody's. Bank of Nova Scotia has an Aa2 rating, while Royal Bank, Bank of Montreal and Canadian Imperial Bank of Commerce are rated Aa3.
Flight to Quality
"It's probably reflective somewhat of a flight to quality because Canada is a highly rated country and the banks are highly rated credits," Bank of Montreal Chief Executive Officer William Downe said in an Aug. 25 phone interview.

The last time bank debt fared better than stocks was in 2011, when total returns for bank bonds reached 5.5 per cent while the S&P/TSX Banks index climbed 1.1 per cent after dividend reinvestments.

Energy and utilities are the worst-performing industries in the bond index, at 0.9 per cent and 0.3 per cent respectively, compared to the 1.9 percent average return among high-grade corporate bonds.

Bonds prices have risen as the yield on 10-year Canadian government bond fell to 1.47 per cent at 9:11 a.m. in Toronto, from 1.79 per cent in January. The Bank of Canada has cut interest rates twice this year to boost the nation's struggling economy.
Rising Premiums
The extra yield on financial debt above government bonds has risen to 98 basis points, the most since July 2012, according to index data. The average premium for high-grade bonds across sectors was 125 basis points on Aug. 31, the highest since January 2012.

This year's bond outperformance compared to stocks may be short-lived, according to Peter Routledge, a bank analyst at National Bank Financial.

"It was certainly better over the last year to own a bank bond over bank equity," Routledge said. "If the Bank of Canada decides to hold off on further rate cuts and starts thinking about rate increases because inflation's going up -- which it's bound to because of our currency -- maybe for the next year it'll be better to own bank equity."

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For Canadian bank investors, it's bonds that have been providing the best returns

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The bond market still considers Canada's financial sector one of the safest havens from turmoil even as bank stocks face their worst losses in 16 years. Financial debt is among Canada's best-performing high-grade bond sectors in a year when plunging commodity prices and slowing global growth stoked volatility and pushed the nation's economy back into recession.

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Welcome to my Padlet, today you are going to learn about risks and rewards you can face by investing in a company’s stocks/bonds. Stocks offer an ownership stake in a company, which usually have more risk attached compared to bonds which are loans made to a company.

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Risks & Rewards of Investing

By: Justis Verrall