Stocks are securities that represent ownership in a company. You might want to invest in stocks if you believe the price of the stock will increase and thereby the value of your investment will increase. Another reason to invest in stocks would be to collect dividends. Companies pay dividends as a way to compensate shareholders for their investments. Dividends can also be a way to generate income.
Bonds represent a loan to a company or other entity.
Bonds have fixed terms and fixed interest rates. They typically generate a higher income stream and are historically less volatile than stocks. Cash and cash equivalents are considered the third basic asset class. Holding cash as part of your allocation can be a way to park your money while waiting for an appropriate investment opportunity. It can also be used to hold funds for emergency use.