What is the difference Between Equity and Bonds? Knowing investing terminology is important to understand your investments. Bonds are debt. They give fixed returns. Equities are riskier. They do not guarantee you anything but you can use equities to build your wealth over a longer period.
Investors generally own several different kinds of investments in their portfolios. In order to diversify their overall holdings, most investors end up with portfolios that contain both equities and bonds. Normally, young people buy more equities and old people buy more bonds. But this is a generalization. Bonds are lower on risk than equities. Why not? Bonds are giving you assured returns while equities are not! But bonds will give you lower returns. Be prepared for that. Don’t expect fancy returns from bonds. Actually, there is something very surprising. If you hold equities for 10 years and above, then the risk is almost very small.