Why are bonds typically considered safer than stocks?

Bonds are typically considered safer than stocks largely because they have fixed interest payments, unlike stocks, which do not guarantee returns. This fixed income feature means that bondholders receive regular interest payments until the bond matures, providing a more predictable cash flow. Additionally, at maturity, the principal amount is returned to the bondholder, ensuring the recovery of the initial investment, barring default.

In contrast, stocks are subject to market volatility, and their returns can fluctuate significantly based on company performance and market conditions. While stocks have the potential for higher returns, they also carry a higher risk of loss, particularly in unstable economic environments. This perception of risk versus safety is a fundamental reason investors may prefer bonds for preserving capital and receiving regular income, especially in uncertain market conditions.