A senior business reporter at the South China Morning Post looks at how stocks and bonds can help balance your portfolio
Retail investors commonly invest in both stocks and bonds, but what's the difference? Why is everyone so excited about the stock market? Isn't the bond market going up as well?
Stocks and bonds are perhaps the two most common types of listed investments, but in many ways they are the exact opposite of each other. Both are issued by companies, and give investors a stake in the future success of the company, but their prices behave in very different ways.
In Hong Kong and the mainland retail investors have much more exposure to stocks because the bond markets remain underdeveloped. Selling bonds means a company is borrowing money from the public, and for many years, China's banks have been the main source of debt financing.
Mainland investors have for years put most of their money into the bank and left it there to collect interest. This means the banks have vaults full of money that they can lend out to companies that need to borrow money to grow, making bank financing relatively cheap and easy to obtain. In comparison, selling bonds was seen as a complicated process that opened the company up to increased scrutiny from outside investors.
Bonds are slow and steady