Which statement best describes the fundamental difference between stocks and bonds as investment instruments?

Introduction / Context:
This question checks whether you understand the basic difference between two major investment instruments, stocks and bonds. Many beginners confuse the ideas of ownership and lending when they start investing, so examination questions often focus on this core concept. Knowing how stocks and bonds differ helps an investor choose instruments that match risk tolerance, income needs, and long term financial goals.

Given Data / Assumptions:
- We are comparing stocks and bonds as standard financial investments.
- We assume normal company shares for stocks and plain vanilla bonds for bonds.
- The focus is on ownership versus lending and not on short term price movements.

Concept / Approach:
Stocks, also called equity shares, represent ownership in a company. When you buy stock you become a part owner and may receive dividends and voting rights. Bonds represent a loan from the investor to the company or a government. The issuer promises to pay periodic interest and repay principal at maturity. The key conceptual difference is therefore ownership versus creditor relationship. This distinction is exactly what the correct option describes.

Step-by-Step Solution:
Step 1: Identify the option that clearly states that stocks provide ownership in a company. Step 2: Check whether the same option describes bonds as loans made to a company or government. Step 3: Option A states that stocks allow investors to own a portion of the company and bonds are loans to the issuer. Step 4: Verify that other options either guarantee returns, confuse ownership, or claim fixed interest for both, which are inaccurate generalisations.

Verification / Alternative check:
A quick verification method is to remember that equity equals ownership and debt equals lending. Stocks are equity; bonds are debt. Any statement that reverses this or ignores ownership is incorrect. Cross check with basic finance textbooks or study material, where this definition is consistent across sources.

Why Other Options Are Wrong:
Option B is wrong because stocks are not guaranteed to give higher returns than bonds in every time period; returns depend on market conditions. Option C incorrectly says bonds give ownership and voting power, which is not true for standard bonds. Option D is wrong because stocks do not normally pay fixed interest, and even many bonds can have variable coupons or special structures, so the statement is too rigid.

Common Pitfalls:
A common mistake is to focus only on risk and return and forget the legal nature of the instrument. Some learners also think that any regular payment implies a bond, which is not correct because dividends from stocks are not fixed or guaranteed. Another pitfall is assuming that all investments that involve a company work in the same way, which can lead to confusion between equity and debt instruments.

Final Answer:
The correct choice is Stocks allow investors to own a portion of the company, whereas bonds are loans made to the company or a government issuer..