What is the difference between a uk governemnt bond and a british petroleum ordianary share?... Any idea?

Question

What is the difference between a uk governemnt bond and a british petroleum ordianary share?... Any idea?

Answer 1

One of these products is a bond issued by a world government. It is a debt owed by the government to you (you lend them money in return for interest payments over the life of the debt and a fixed date when the principal will be repaid). It will have a fairly low rate of return and essentially 0 chance of loss of principal (assuming you hold it to maturity). It may lose value due to changes in interest rates or fail to be profitable due to inflation, but it is essentially a zero-risk investment that pays a low rate of return.

The other product is the stock of a publically traded company (BP). It is an equity (ownership) share of that company. It is traded publically on the stock market and can gain or lose value depending on how well the company performs (or doesn't perform) or just due to market instabilities. It has the possibility for a much higher rate of return than a government bond, but also much more risk. If BP went out of business you likely wouldn't get your entire (or any of) invesment back.