Stocks have considerable more risk. Equity is subordinated to debt, which means that if the company goes bankrupt the bondholders get paid out first, before shareholders get anything. There is always the risk, therefore, that a shareholder could receive nothing for their shares, and lose all of their money. Even a bondholder might receive something -- pennies on the dollar -- in the event of bankruptcy, but a stockholder receives nothing at all This risk is only mitigated through diversification (Damodaran, n.d). There is also the risk for any given stock that it drops below the purchase price and never recovers, so that the investor will need to take a loss in order to sell. This is also the case with mutual funds. While less risky because of their diversified nature, they still function like equities and there is no guarantee either of distributions or of capital gains to mutual...
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