COMPARISON AMONG

STOCK AND BOND

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 Background
Today many people in the community carry
out investment activities. Investment is
basically a person's creativity to get profits.
In investing, there are so many alternatives
that can be used by investors to make the
desired investment, for example
investments can be made, such as saving,
buying land and buildings, buying gold, and
buying securities such as stocks and
bonds.

Stocks and bonds are very promising

investment alternatives, however, there are
still many investors who have not invested
excess funds to invest in stocks and bonds
because the investors do not know the
benefits that stocks and bonds can provide.
Stock

WHAT IS
STOCK?

Shares are proof of ownership of a company that makes a public offering (go public) in a certain nominal and percentage.

Other definition, It can be concluded that the stock shows ownership of a company and gives rights to its
owner. The ownership contributes to the holder in the form of return that can be obtained, namely capital gains
on shares that have a selling price higher than the purchase price, or dividends on those shares
Bond

WHAT IS BOND?

Bonds are debt instruments for companies that want to obtain capital.

The maturity period of a bond is the number of years the issuer has promised to fulfill its
obligations, the maturity of the bond refers to the expiration date of the debt and the day the
issuer will redeem the bond by paying the amount owed.
 DIFFERENCES
Shareholder earnings are referred to
as dividends in which the frequency of
income he receives is not determined
while in bondholders, the income
received has been stated on the bond
with an interest rate that has been
adjusted for a certain period
Investment returns obtained by
shareholders depend on the profits of
the company so that it cannot be
determined permanently. Even in some
cases if the company loses, then you
as a shareholder also feel the impact.
Whereas the bondholders' profits can
be ascertained because in fact it has
no relationship with the company
Time of stock investment is not a
certain period while the bonds have a
fixed period.
The form of ownership in shares is the
shareholders owning the ownership of
certain companies, while the form of
ownership in bonds is only in the form
of debt recognition.
The price of a stock investment is
uncertain and quite difficult to predict.
Sometimes stock prices can go up but
not infrequently they also go down,
depending on the company's
development. Whereas bond prices
are usually relatively stable and
sensitive to interest rates and inflation
rates.
Shareholder tax has been deducted
first so that the profits obtained are net,
while the owner of the bond, the profits
to be deducted. Because of that, the
tax deduction is usually done before
the debt payment by the company.
Types of Stock
Types of shares are based on Market Capitalization and Liquidity.
Market Capitalization is the share price multiplied by the number of shares
outstanding in the market. A large capitalized stock is usually more liquid or easily
traded on the stock exchange. Based on the capitalization, the types of shares
are categorized into :

Featured or Top Share (Blue Chip - big cap)

Second Tier Stock(Second Layer – medium cap)

Third Tier Stock(Third Layer – small cap)

High Liquidity Stock

Cylical Stock

Sleeping stock
Types of Stock
Types of shares based on their ownership

Common Stock

Preferred Stock

Types of shares are based on volatility

Stocks with High Volatility

Low Volatility Stocks

BONDS
Bonds (bonds) are forms of
interest bearing notes. Bonds,
like ordinary shares, are sold in
small units (for example in a
matter of fifteen thousand
rupiahs or multiples of fifteen
rupiahs).

Long-term debt
• Bonds Payable
• Mortgage Notes (Payable Mortgage) is a type of long-term loan (debt) with a guarantee
of immovable property
• Long Term Notes
• Rent Payable
• Agreements with installment payments (Installment Payment Contract)
Why are Bonds Issued?
Long-Term Funding like notes and rent rarely able to
provide the funds needed.

To obtain a large amount of long-term capital, company

management usually decides to issue ordinary shares
(equity funding) or bonds (Fahmi, 2013).

The advantages of bond funding compared to ordinary

shares are as follows.
• Shareholder control has no effect
• Bondholders do not have voting rights, owners
(shareholders) still have full control over the company.
• There are savings from the tax side
• Bond interest can reduce the amount of tax that must
be paid, while dividends on shares do not.
• Earnings per share will be higher
• Although bond interest expense reduces net income,
earnings per share in common shares will be greater by
funding through bonds because no additional ordinary
shares are issued.
Types of Bonds

Bonds with Collateral and Unsecured Bonds

Secured bonds
(secured bonds) have
special assets to be Futures and serial bonds
used as collateral for
the bond issuance. Bonds that mature
Unsecured bonds are at the same time in
issued through the the future are called Bonds in Name and Bonds in Performance
borrower's general term bonds.
credit. Conversely, bonds Bonds issued in the
that mature at name of the owner
different times are called registered Convertible Bonds and Retractable Bonds
(gradually) are bonds.
called serial bonds. Bonds that can be converted Bonds that can be withdrawn by
into common shares based on a company before maturity are
the choice of bondholders are called callable bonds.
called convertible bonds.
Bonds Rating
Rating Rationale by PEFINDO
Example of world-famous Rating Agencies
1. Moody’s Investor Services
2. Standards & Poor's Corporation
3. Duff & Phelps

Indonesian Rating Agencies

1. PT. Pemeringkatan Efek Indonesia (PEFINDO)
2. Moody’s Indonesia

The public who buys bonds will consider their

purchases based on ratings. The rating illustrates the
credibility and eligibility of a bond to be used as a
company's current assets.

Source: https://pefindo.com
Conclusion
Of The
Topic

A stock analysis is required in order to estimate

the intrinsic value of a stock and then compare
it with the current market price of the stock. The
intrinsic value shows the expected cash flow
present value of the stock.

Bonds are an alternative for investors to invest

their capital in the capital market. To make a
good investment in bonds, investors need to
understand the characteristics or characteristics
of bonds.
Thank you
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