Bonds vs Stocks Word Search
Find 8 essential bonds and stocks terms. Click any word to understand the differences between fixed income and equity, and how each fits in a portfolio.
Investing Term
Find 8 essential bonds and stocks terms. Click any word to understand the differences between fixed income and equity, and how each fits in a portfolio.
Study these terms before or after solving the puzzle. Each definition includes a real-world US example.
Yield is the income return on an investment. For bonds, yield moves inversely to price — when prices rise, yields fall. The 10-year Treasury yield is a key global benchmark.
A $1,000 bond paying $40 annually has a 4% yield. If the price rises to $1,100 because rates fell, the yield drops to 3.6%.
The coupon is the fixed annual interest rate paid by a bond, set at issuance and remaining fixed throughout the bond's life.
A 30-year Treasury with a 4.375% coupon pays $43.75 per year on a $1,000 face value — every year until maturity, regardless of rate changes.
Maturity is the date when a bond's principal is repaid. Longer maturity bonds carry more interest rate risk but typically offer higher yields.
A 30-year Treasury issued in 2024 matures in 2054. If held to maturity, you still receive your full principal back regardless of rate changes.
A dividend is a cash payment from company profits to shareholders. Dividend Aristocrats — companies with 25+ consecutive years of dividend growth — are considered financially strong.
Johnson & Johnson has increased its dividend for over 60 consecutive years, providing shareholders with growing income plus stock price appreciation.
Equity represents ownership in a company through stocks. Unlike bonds with fixed payments, equity returns are variable and potentially unlimited over long periods.
Over 30 years, US stocks averaged 10%/year vs 5% for bonds. $10,000 in stocks grew to ~$175,000; in bonds only ~$43,000.
In bonds, principal (face value) is the amount repaid at maturity — typically $1,000. Protecting principal while earning returns is a key goal of conservative investing.
A $1,000 Treasury bond pays 4% annually for 10 years, then returns the full $1,000 — guaranteed by the US government.
Stocks and bonds carry different risks. Stocks face market and business risk; bonds face interest rate, credit, and inflation risk. Understanding each is essential for portfolio construction.
In 2022, both stocks (-18%) and bonds (-13%) fell simultaneously — an unusual event that highlighted bonds are not always a safe haven during aggressive Fed tightening.
Total return from stocks includes price appreciation plus dividends. Bond return includes interest plus price changes. Stocks have outperformed bonds long-term but with higher volatility.
From 1926-2023: US stocks averaged 10.1%/year vs 5.2% for bonds — but in any year stocks might fall 30-40% while bonds stay flat.