Distinguishing between the stocks and bonds of a company

Dương Thị Kim Ngân
February 7, 2025 7:30 pm
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Distinguishing between stocks and bonds of businesses is an important step to help investors understand these financial instruments. A clear distinction will help investors choose the appropriate strategy, optimize profits and minimize risks. The following article Long Phan will provide you with the most in-depth, objective and detailed view of the difference between stocks and bonds according to current regulations.

Table of Contents

What are stocks and bonds?

According to Clause 1, Article 121 of the Law on Enterprises 2020, stocks are defined as certificates issued by joint stock companies. This is a legal document or electronic book entry confirming an investor’s ownership of one or more shares in a specific joint stock company.

According to Clause 3, Article 4 of the Law on Securities 2019, bonds are securities that confirm the legal rights and interests of the owner of a part of the debt capital of the issuing organization. Bonds represent a lending relationship between investors and issuers.

Characteristics of stocks and bonds

Characteristic	Stocks	Bonds
Function	A stock is a financial instrument that represents an investor’s capital ownership in a joint stock company. When owning shares, investors become shareholders and have the right to participate in the financial activities of the enterprise.	Bonds are financial instruments used to record debt obligations of businesses. When businesses issue bonds, they commit to returning the principal amount to investors at maturity, along with the agreed interest rate.
Publishing subject	Stocks are issued by joint stock companies to raise capital from investors. These companies can use this capital to expand production and business activities, research and development or invest in new projects.	Bonds can be issued by many types of businesses, including joint stock companies, LLCs, or financial institutions. This is a popular way of raising capital for large and small businesses.
Benefit	Stocks can be traded and transferred freely on the stock market. This helps shareholders to sell or buy back shares and flexibly adjust their investment portfolio. Stocks give voting rights to shareholders in general meetings of shareholders. Shareholders can participate in deciding important issues of the company such as electing the board of directors, approving development strategies or deciding on major financial issues. This right helps shareholders participate in the corporate governance process.	Bonds have a certain term, usually from several years to several decades. When due, the business will have to repay the principal amount to investors. Bonds provide fixed income to investors through periodic interest payments. This interest rate is determined in advance and helps investors predict a stable income level throughout the bond holding period.

>>> See more: Rights and obligations of investors when buying bonds.

Points to distinguish between stocks and bonds

Issuing authority

Only joint stock companies are allowed to issue shares. The issuance, purchase, sale and transfer of shares must strictly comply with the provisions of the Law on Enterprise and the Law on Securities.

Bonds are issued by many types of businesses, including:

Joint stock company;
Limited liability company;
Credit institutions;
The enterprise meets all business conditions.

Objects allowed to own

Stocks can be purchased and owned by domestic and foreign individuals, institutional investors, as well as qualified investors in accordance with the law. These individuals and organizations can participate in the stock market and carry out investment transactions depending on their needs and financial capabilities, and must comply with regulations related to securities investment.

Bonds can be purchased and owned by:

Individuals 18 years of age or older;
People who are financially qualified and have investment needs;
Organizations that meet financial capacity and professional investors also have the right to participate in the bond market.

Owner’s rights

For stocks

Stocks are a form of asset ownership. Owning stocks brings benefits such as:

Right to receive dividends: Shareholders have the right to receive dividends from the company’s profits, depending on business results and decisions of the general meeting of shareholders;
Right to vote at the general meeting of shareholders: Shareholders have the right to participate in voting at shareholders’ meetings, thereby influencing important decisions of the company, such as electing the board of directors or approving development strategies;
Right to transfer shares: Shareholders have the right to transfer their shares to other individuals or organizations on the stock market, providing flexibility in buying and selling and adjusting investment portfolios;
Preemptive rights to purchase additional issued shares: Existing shareholders have preemptive rights to purchase additional issued shares when the company raises capital through the issuance of new shares, helping to maintain ownership ratio and protect their interests.

Investors' benefits when owning stocks — Investors’ benefits when owning stocks

For bonds

Bond investor benefits include:

Receive fixed interest rates: Bond investors receive fixed interest rates according to the agreement, ensuring stable income throughout the bond holding period;
Repayment of principal upon maturity: When the bond matures, investors will be refunded the entire principal amount invested, helping to protect their capital;
Right to transfer according to regulations: Investors have the right to transfer their bonds to other individuals or organizations, but must comply with established transfer regulations and conditions;
Priority in payment when a business is dissolved: In the event of a business’s dissolution or bankruptcy, bond investors will have priority in payment before shareholders, helping to minimize financial risks for them.

Ownership period

Stocks have no holding period limit, allowing investors to hold stocks throughout the company’s life. The right to decide whether to hold or sell stocks depends entirely on the owner’s decision.
Bonds have a definite term, with the maturity date clearly stated in the issuance conditions. Bond holding time usually ranges from 1 to 5 years, depending on the type of bond and the terms of each issuance. After the maturity date, the issuer will repay the principal to the investor, along with the previously agreed interest rate.

In-depth consulting services on stocks and bonds at Long Phan

Long Phan is proud to have a team of experts with extensive experience in securities activities and investment consulting. We are committed to providing customers with the safest and most professional investment consulting services.

Long Phan provides in-depth consulting services including:

Analyze appropriate investment strategies for customers’ needs;
Support customers in assessing risks for each specific investment strategy;
Consulting on choosing the appropriate investment form, analyzing the advantages and disadvantages of each investment method that customers choose;
Support to answer problems that arise during investment activities;
Monitor your investment portfolio, ensuring professionalism and science.

Understanding the characteristics of each type will help investors make reasonable decisions, optimize profits and minimize risks during the investment process. We will accompany customers throughout the investment process. For detailed advice, please contact Long Phan the hotline: 0906735386 for quick and dedicated advice from our team of experts.

Dương Thị Kim Ngân

Jurist Ngan Duong Thi Kim - Partner of Long Phan, Ms. Ngan possesses profound knowledge in business consulting, labor, and contracts. With dedication and creativity, Ms. Ngân has achieved significant success in advising and supporting businesses in critical areas such as legal matters, finance, management, and contracts. She is committed to providing optimal solutions and helping clients succeed in the business environment.