Kembara’s Financial Solutions - Bond and equity markets
Markets that allow holders of stocks and bonds to buy or sell investments are another component of the financial services sector. The following are some ways that stocks and bonds differ from one another: • Stocks give the holder a share in the company issuing them. But bonds don't. • The repayment date for stocks is not fixed. • Equities do not pay interest; Bonds normally have a predetermined timetable for repayment. Bonds normally do pay an annual interest rate that is defined in percentage. With this in mind, why are investors prepared to invest in stocks when there is little to no chance that the issuing company will ever buy those stocks back? Fundamentally, they want the business to succeed and turn a profit. Although the corporation may provide a portion of these profits to shareholders in the form of dividends, equity holders are aware that they will eventually be able to sell their shares of stock to another party. They will be able to realize their investment by selling the stocks, possibly for a profit greater than what they paid for the shares. The equity markets, which include renowned exchanges like the New York Stock Exchange (NYSE), Abu Dhabi Securities Exchange (ADX), London Stock Exchange (LSE), Europe's Euronext exchange, Japan's Tokyo Stock Exchange (TSE), and China's Shanghai Stock Exchange, provide facilities for the sale of stocks (SSE). Most nations have stock markets; further examples are the Singapore Exchange (SGX), Colombo Stock Exchange (Sri Lanka), Bombay Stock Exchange (India), Johannesburg Stock Exchange (JSE) (South Africa), and Tadawul (Saudi Arabia). These exchanges started off as gathering locations where buyers (or people representing them) would meet sellers (or people representing them) to agree on purchases and sales. Today, they trade millions of shares every day. Nowadays, the vast majority of transactions are conducted electronically, and most exchanges essentially function as online auction houses akin to eBay. Bonds can be purchased or sold prior to their repayment dates, just like stocks. But unlike shares, most bonds are often bought and traded outside of the major markets. The fact that almost all bonds have a maturity or repayment date when the bondholder's IOU will be paid back is largely responsible for this. This will not occur for equity holders, hence a facility to sell the shares has historically been considerably more crucial. Bond buyers and bond sellers are connected electronically through facilities known as over-the-counter (OTC) facilities for those bond buyers who do want to sell their bonds before the payback date. OTC simply refers to transactions that are conducted outside of recognized exchanges.
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