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Difference between buying a corporate bond vs buying stock in the same company

When you are buying a stock of a company, you are buying part of the ownership of that company. This means you rely on potential dividends or the stock price to move upwards to generate a return, while being exposed to the risk of the stock price dropping. 

When you buy a corporate bond, you become a creditor to the company as you lend them cash. In return for this loan, you receive a periodic interest (coupon) until the maturity date, at which point the bond’s principal is repaid. Bonds typically provide more predictable income at a lower risk, while stocks have the potential for higher returns at a higher risk. 

For more information on the risks associated with financial instrument transactions, consult our Risk Description.