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. Where can I find out about upcoming stock splits?

    Learn what a stock split is, how it is accounted for and where to find upcoming information about stock splits on the Internet.
  2. Does the buyer or the seller control a call option?

    Buy call options and maintain control over the price you pay and when to buy a given stock. Learn how to maintain control ...
  3. How do I invest or trade market indicators?

    Read about how investors can trade actual market indicators, such as the S&P 500 Index, rather than specific stocks or commodities.
  4. What are some ways to reduce downside risk when holding a long position?

    Learn about the various methods a trader can use to minimize risk of loss or protect a portion of profits in an existing ...
RELATED TERMS
  1. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
  2. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
  3. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  4. Bulldog Market

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

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

    A type of strategy regarding a put option, which is a contract ...

You May Also Like

Related Articles
  1. Mutual Funds & ETFs

    How do I invest or trade market indicators?

  2. Options & Futures

    Examples Of Exchange-Traded Derivatives

  3. Options & Futures

    Advantages Of Trading Futures Over Stocks

  4. Mutual Funds & ETFs

    Which ETF is the Best Bet: VTI or IWV?

  5. Trading Strategies

    Top Day Trading Instruments

Trading Center