What's the difference between stocks and bonds?

Stocks are a partial ownership of a company and their value may rise and fall with the success or failure of the business. Bonds are loans to finance company operations and receive a predetermined interest rate. Bondholders are paid first in a bankruptcy (unless it is GM and Obama is in charge).

bonds vary with interest rates (as rates rise, bond values fall) stocks generally do not (stocks depend on the industry they represent, the growth in that industry)

Both of them will send you to the poor house at some point.

Bonds pay a fixed amount in interest payments but stocks can pay dividends (if profitable) that can increase over time if the company grows. At the same time, the value of the stoke fluctuates with the performance of the company's business but a bond usually (outside an ability to pay interest) value goes up and down with the level of interest rates. For example a $1000 bond paying 5% will get you $50 a year income but - if interest rates rise the value of the bond will probably less than $1000 unless you hold it to maturity. $1000 of stock in a company may pay 5% in dividends and a few years from now it may be worth $2000 or $500 and its dividend may be higher or lower.