Saving and Investing for Students

U.S. SECURITIES AND EXCHANGE COMMISSION
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15
THE MAIN DIFFERENCES BETWEEN
STOCKS AND BONDS
Stocks
Bonds
If the company profits or is perceived as 
having strong potential, its stock may go 
up in value and pay dividends. You may 
make more money than from the bonds.
The company promises to return money 
plus interest. 
Risk: 
The company may do poorly, and 
you’ll lose a portion or all of your invest-
ment.
Risk:
If the company goes bankrupt, 
your money may be lost. But if there is 
any money left, you will be paid before 
stockholders. 
You take your time and make a careful decision. Only time 
will tell if you made the right choice. You’ll keep a close eye on 
the company and keep the investment as long as the company 
keeps selling a quality computer that consumers want to use, and 
it can make an acceptable profit from its sales.
WHY SOME INVESTMENTS MAKE MONEY
AND OTHERS DON’T
You can potentially make money in an investment in a company if: 
• 
The company performs better than its competitors.
• 
Other investors recognize it’s a good company, so that 
when it comes time to sell your investment, others want to 
buy it.
• 
The company makes profits, meaning they make enough 
money to pay you interest for your bond, or maybe divi-
dends on your stock.
You can lose money if:
• 
Consumers don’t want to buy the company’s products or 
services.

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16
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SAVING AND INVESTING
• 
The company’s officers mismanage the business, they spend too 
much money, and their expenses are larger than their profits.