What is generally true about stocks compared to bonds?

Stocks typically offer higher returns than bonds due to their higher risk profile and potential for capital appreciation. When investors purchase stocks, they are buying ownership shares in a company, which can benefit from growth in revenue and profits, leading to an increase in stock prices over time. Historically, stocks have outperformed bonds in the long run, largely because of the potential for higher earnings and return on investment, although they also come with increased volatility and risk of loss.

In contrast, bonds generally provide fixed interest payments and return of principal at maturity, making them a more stable but typically lower-return investment compared to stocks. This characteristic of stocks aligning with higher expected returns is a key reason why many investors seek a balance in their investment portfolios, aiming to capture stock market gains while managing risk through bonds or other fixed-income securities.