Why are bonds less riskier than stocks?
In: Economics
They are not always less risky, but bonds have a floor – unless the issuer goes bust, they will pay a certain amount on a certain date (or dates). Stocks are only worth what someone else will buy them for, and there’s no guarantee that someone will want to buy the stocks you own when you want to sell them, at least not at the price you want. Assuming the underlying company remains solvent, a bondholder is entitled to the stream of payments the bond promises to pay, and that’s trivial to value. A stockholder is entitled to nothing except the ability to sell that stock to a willing buyer (leaving issues like dividends and voting rights aside).
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