Stocks vs bonds: what's the difference and how much of each?

Almost every portfolio is built from two main ingredients: stocks (shares) and bonds. They play very different roles.

Stocks: you’re an owner

A share is a small piece of ownership in a company. You make money when:

• the company grows and the share price rises, and
• the company pays out part of its profits as dividends.

Over long periods, stocks have historically delivered the highest returns of the major asset types — but with big swings. Falls of 30–50% have happened several times in the last few decades.

Bonds: you’re a lender

A bond is a loan to a government or company. You receive regular interest and get your money back when the bond matures, as long as the borrower doesn’t default.

• Government bonds from stable countries are among the safest investments.
• Corporate bonds pay more interest, with more risk.
• Bond prices move opposite to interest rates: when rates rise, existing bonds fall in value, and the longer the bond, the bigger the move.

How they compare

Choosing a mix

The right mix depends mainly on when you’ll need the money and how you’ll react to losses:

• Money needed within ~3 years: keep it out of stocks — savings or short-term bonds.
• 10+ years away: many investors hold mostly or entirely stocks.
• In between: a blend, shifting towards bonds as the date approaches.

A useful test: imagine your portfolio falling by a third. If you’d sell in panic, you hold too many stocks. The best mix is the one you can stick with.

Easy ways to hold both

Bond ETFs and multi-asset ETFs (which hold stocks and bonds in fixed proportions, such as 60/40 or 80/20) let you own a ready-made mix with one fund. Some countries also offer retail government bonds directly to citizens — check your country page.