What is one reason why bonds may be considered a safer investment than stocks?

Bonds are often considered a safer investment than stocks primarily because they are typically backed by the creditworthiness of an issuer, which can be a government or a corporation. When a bond is issued, the issuer commits to pay the bondholder periodic interest payments and to return the principal amount at maturity. Government bonds, in particular, are seen as having low default risk since they are backed by the taxing power and financial resources of the government. This guarantee provides a level of security for investors, especially conservative ones who prioritize capital preservation.

In contrast, stocks represent ownership in a company and can be highly volatile as their prices fluctuate based on market conditions, company performance, and investor sentiment. This inherent risk makes them potentially more rewarding but also riskier than bonds. The other choices listed do not accurately describe the primary reason for bonds being considered safer than stocks. For instance, while bonds may provide predictable returns that are often fixed, this does not imply variability, and the lack of a maturity date would contradict the fundamental nature of bonds. Similarly, while bonds can be traded, this characteristic does not directly contribute to their safety compared to stocks.