What is the difference between the bond market and the stock market?

By Chizoba Morah AAA
A:

The bond market is where investors go to trade (buy and sell) debt securities, prominently bonds. The stock market is a place where investors go to trade (buy and sell) equity securities like common stocks and derivatives (options, futures etc). Stocks are traded on stock exchanges. In the United States, the prominent stock exchanges are: Nasdaq, Dow, S&P 500 and AMEX. These markets are regulated by the Securities Exchange Commission (SEC).

The differences in the bond and stock market lie in the manner in which the different products are sold and the risk involved in dealing with both markets. One major difference between both markets is that the stock market has central places or exchanges (stock exchanges) where stocks are bought and sold. However, the bond market does not have a central trading place for bonds; rather bonds are sold mainly over-the-counter (OTC). The other difference between the stock and bond market is the risk involved in investing in both. Investing in bond market is usually less risky than investing in a stock market because the bond market is not as volatile as the stock market is.

Learn more about stocks and bonds in our Stock Basics and Bond Basics Tutorials.

This question was answered by Chizoba Morah

RELATED FAQS

  1. How is a penny stock created?

    Understand how penny stocks are issued and regulated, and learn how these sometimes rewarding but always risky investments ...
  2. What exactly is being done when shares are bought and sold?

    Most stocks are traded on physical or virtual exchanges. The New York Stock Exchange (NYSE), for example, is a physical exchange ...
  3. What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy ...

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that ...
  4. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ...
RELATED TERMS
  1. Bulldog Market

    A nickname for the foreign bond market of the United Kingdom. ...
  2. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
  3. Short Put

    A type of strategy regarding a put option, which is a contract ...
  4. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
  5. Wingspread

    To maximize potential returns for certain levels of risk (while ...
  6. Volatility Smile

    A u-shaped pattern that develops when an option’s implied volatility ...
comments powered by Disqus
Related Articles
  1. All About Liquid Commodities
    Options & Futures

    All About Liquid Commodities

  2. Pick the Right Brokerage Account for ...
    Options & Futures

    Pick the Right Brokerage Account for ...

  3. The Top Technical Indicators For Options ...
    Options & Futures

    The Top Technical Indicators For Options ...

  4. An Introduction to Government Loans
    Economics

    An Introduction to Government Loans

  5. Should You Invest In Fannie Mae Stock? ...
    Investing News

    Should You Invest In Fannie Mae Stock? ...

Trading Center