Know the difference between stocks and bonds

In the stock market, there are two main instruments: bonds and stocks. There are others as well. But these two are more than enough to get started.
A bond is a debt that is issued by an entity. This entity could be a government, a municipality, or a corporation. To keep it simple, you should only focus on government bonds. They are the safest and most straightforward. A bond has a duration and interest rate.
When it needs money, the government will issue bonds that people can buy. In return for their money, the issuer will receive interests regularly. Once the bond reached its duration, the issuer will receive its money back.
The stock of a company is the set of all the shares of this company. You do not buy stocks directly, but you buy shares of stocks. By purchasing a share of a company’s stock, you will own a part of the company.
People investing in stocks are expecting the share price to grow. Generally, as the company grows, so does its share price. Another advantage of some shares is that the company pays a dividend to its shareowners.
Once a company has some money, it has several choices. It can invest it in itself to grow. Or it can give it back to the shareowners in the form of a dividend. This dividend will be given in cash to you into your broker account.
In practice, there is one significant difference between these two instruments: bonds have smaller risks and smaller returns, while stocks have higher risks and more profits.
In short, it means that stocks are great for the long-term. And bonds are better for the shorter terms. But bonds will reduce the volatility of a portfolio. They are good for your risk tolerance.