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. What is a volatility smile?

    Discover what options traders mean when they refer to a "volatility smile," and learn why a volatility smile's existence ...
  2. Is short selling ethical?

    Understand the concept and practice of short selling, and examine the ethical questions that some investors raise in regard ...
  3. How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing ...
  4. What kinds of restrictions does the SEC put on short selling?

    Learn about the rules and regulations on short selling enforced by the U.S. Securities and Exchange Commission, or SEC, including ...
RELATED TERMS
  1. Market Value

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

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

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

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

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

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

You May Also Like

Related Articles
  1. Options & Futures

    Options -- Accessing Stakes In Apple ...

  2. Investing Basics

    The Strange New World Of The Bitcoin ...

  3. Options & Futures

    These Are The Top Brokerage Firms For ...

  4. Options & Futures

    Apple As An Example Of How a Protective ...

  5. Options & Futures

    Apple As An Example Of How to Use a ...

Trading Center