What is the difference between a stock and a bond?

A stock represents ownership in a company and entitles the holder to a portion of the company’s profits through dividends and potential capital gains. Stocks can offer high returns, but they also carry higher risk, as their value can fluctuate with market conditions and the company’s performance. A bond, on the other hand, is a debt instrument issued by a company or government that pays periodic interest to the bondholder and returns the principal at maturity. Bonds are generally considered safer investments than stocks because they offer fixed returns, but they also typically offer lower potential returns. While stocks represent equity ownership, bonds represent a loan to the issuer.