In the last edition, we explained that shares represent ownership, while bonds represent debt.
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When you buy shares, you buy ownership of the company that sold or issued the shares. But when you buy bonds, you are lending to the organisation (government or company) that sold the bonds. You now know the basic difference between shares and bonds.
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But before you decide to buy bonds, you need to be aware of the benefits, or the advantage they have over shares, and the risks, or limitations.
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Bonds basically offer two things. First is fixed stream of income, and secondly safety of investment. As mentioned in the last edition, the bond issuer always indicate, the interest rate he/she wants to pay on the loan being generated with the bonds. The interest rate is called the 'coupon rate', and it is contained in the bond offer document.