Bonds: lending to a company
Remember Week 12: a stock is one equal share in who owns a company, so the owner gains or loses with the company’s results, which can be risky. Companies also sell bonds to raise money. A bond is a different idea: it is a loan. The person who buys a bond lends money to the company, and the company promises to pay it back with a little extra. So a stock makes you a part-owner and a bond makes you a lender. Both can have risks, and nobody can promise the future. Some adults choose the stocks of a company whose work they respect, such as one that protects nature. Adults deal in them through trusted, official channels, which keeps control in their hands. Search tools can help a grown-up learn about a company: they can look up its reputation, the causes it supports, and what others say about how its stocks do or what its bonds pay. Remember: only adults invest. We use pretend paper pounds, and we give no advice on what to buy.
| Stock | Bond | |
|---|---|---|
| what you are | part-owner | lender |
| what you may get | gain or loss with the company’s results | your money back, with a little extra |
| idea to remember | equal part of ownership | a loan to the company |
| Plan | Sold | Money raised | Company later |
|---|---|---|---|
| 1: stocks | 10 at 100 | 1000 | shares ownership |
| 2: bonds | 10 at 100 | 1000 | owes 1050 |
Stock or bond? Write six statements on cards, such as ‘I own a small part of the company’, ‘I lent money to the company’, ‘The company promised to pay me back with extra’ and ‘My part may go up or down with the company’s results’. Sort the cards under the two headings ‘stock’ and ‘bond’. Then write why no one should buy either without help from a grown-up.