What is Bond in Stocks? Understanding Bonds vs Stocks
17 March 2025 · Sachin Gadekar
Understanding Bonds in Stocks – Types, Differences & Investment Guide.
What is a Bond in Stocks?
Investing in the financial market involves choosing between different asset classes, with bonds and stocks being the most common options. While stocks represent ownership in a company, bonds are fixed-income securities that function as loans given to corporations or governments. Understanding what a bond in stocks is and how it fits into an investment portfolio can help you make informed financial decisions.
A bond is a debt instrument issued by governments, corporations, or municipalities to raise capital. Unlike stocks, where investors become shareholders, bondholders are lenders who receive fixed interest payments until the bond matures.
How Do Bonds Work?
Issuance: Companies or governments issue bonds to raise funds.
Coupon Payments: Investors receive periodic interest payments at a fixed or floating rate.
Maturity: On the maturity date, the issuer repays the principal amount to the bondholder.
Types of Bonds in the Stock Market
If you're wondering, “What are the 5 types of bonds?”, here’s a quick breakdown:
Government Bonds – Issued by governments (e.g., RBI bonds, treasury bonds).
Corporate Bonds – Issued by companies to fund business operations.
Municipal Bonds – Issued by local governments for infrastructure projects.
Convertible Bonds – Can be converted into company shares.
Junk Bonds – High-yield but risky bonds from companies with lower credit r
Bonds vs Stocks: Key Differences
| Feature | Bonds | Stocks |
|---|---|---|
Where to Buy Bonds in India?
If you’re looking for what is bond in stocks in India, here’s how you can invest:
Stock Exchanges: NSE & BSE list corporate and government bonds.
RBI Retail Direct: Buy government bonds directly from RBI.
Bond Market Platforms: TapBonds.com offers various bond investment
Stocks and Bonds Examples
Stock Example: Buying shares of Tata Motors makes you a shareholder with voting rights.
Bond Example: Purchasing NHAI bonds means you lend money to the government and earn interest over time.
FAQs
1. What is bond financing in stocks?
Bond financing refers to raising capital by issuing bonds instead of selling equity. Companies use bonds to fund expansion while avoiding shareholder dilution.
2. What is the difference between bonds and stocks?
Bonds are debt instruments with fixed returns, while stocks represent ownership with variable returns.
3. What are the safest bonds to invest in India?
Government bonds, PSU bonds, and AAA-rated corporate bonds are among the safest investments.
4. Can I buy government bonds through NSE?
Yes, certain government bonds are tradable on NSE and BSE under the NDS-OM (Negotiated Dealing System - Order Matching) platform.
Conclusion
Understanding bonds in stocks is essential for diversifying your portfolio. While stocks offer growth potential, bonds provide stability and fixed income. Based on your risk tolerance, you can invest in either—or a mix of both—to maximize returns.