Stocks are generally riskier than bonds, with more upside and downside, so they attract more risk-tolerant investors. Whether you choose to invest in stocks or bonds will likely be determined in part by your time horizon. Financial advisors often recommend a portfolio that shifts from stocks to bonds as the investor approaches retirement. Moving money from stocks to bonds also helps preserve capital, although you lose the opportunity for higher gains.
Why are bond markets generally more stable than stock markets? Stocks represent a share of ownership in a business, so they move according to the prospects of that business, which can change significantly. A bond, on the other hand, represents a share of the business's debt, whose price can change modestly with interest rates, but will be generally stable unless investors fear the company going into bankruptcy.
Fixed income, by definition, is more stable than stocks, whose return is not scheduled the way bonds are.
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