A share of stock is a piece of the company. A bond is a loan that comes due on a set date.

Investor.gov, the investor site of the U.S. Securities and Exchange Commission, defines a stock as a security that gives stockholders a share of ownership in a company. Stocks are also called equities. Common stock lets the owner vote at shareholder meetings and receive dividends. Those dividends are paid only when the company declares them. On the same site's bond explainer, the company has no matching duty to pay dividends to shareholders. The share has no maturity date. The company does not have to buy it back on a set day.

A bond is the loan with a date

A bond is a debt security. Investor.gov compares it to an IOU. Borrowers issue bonds to raise money from people willing to lend for a set period. Buying a bond means lending to the issuer. The issuer may be a government, a municipality, or a corporation. The issuer promises a specified rate of interest during the life of the bond, and repayment of the principal when the bond matures. Principal is also called face value or par value. A corporate bond, on the site's glossary, does not give the holder an ownership interest in the company.

Many bonds pay that interest on a schedule. Investor.gov says the typical schedule is every six months. If the bond is held to the maturity date, the bondholder gets the face value back. That date is written into the bond. A common share does not have one.

A Treasury bill is still that loan

U.S. Treasury securities are issued by the Department of the Treasury for the federal government. Bills mature in a few days up to 52 weeks. Notes mature within ten years. Treasury bonds typically mature in 30 years and pay interest every six months. A Treasury bill is still a loan with a due date. A share in a public company is still an ownership stake.

| | Stock | Bond | | --- | --- | --- | | What you hold | An ownership share in the company | A loan to the issuer | | Repayment date | No date when the company must take the share back | Maturity date, when face value is due | | What the issuer owes | Dividends only if the company declares them | Stated interest, then principal at maturity |

The number beside a stock ticker is the market price of that ownership share. The terms on a bond are the interest rate and the date the principal comes back.

Sources

  • U.S. Securities and Exchange Commission, Investor.gov, stocks as ownership shares, common stock, votes and dividends, Stocks
  • Investor.gov, a bond as a debt security, issuers, interest, and principal at maturity, Bonds
  • Investor.gov, no ownership interest in a corporate bond, and no duty to pay dividends on the stock, Bonds or fixed income
  • Investor.gov glossary, face value returned on a maturity date, interest generally semiannual, Corporate bonds