Sound Investing Are you better off investing in bonds or stocks paying dividends?
Mar 13, 2019
This discussion dives into the merits of dividend-paying stocks versus bonds for income-seeking investors. It weighs the effectiveness of a balanced fund against target date funds, analyzing risks and potential returns. The conversation also highlights the importance of dollar cost averaging in volatile markets and encourages younger investors to stay committed. Additionally, it unpacks the differences between ETFs and mutual funds, stressing the significance of diversification and strategic portfolio construction.
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Evaluate Return Needs and Risk Tolerance
- Assess your needed rate of return before choosing stocks or bonds.
- Know your maximum tolerable annual loss to manage risk effectively.
Dividends Don't Prevent Big Losses
- Dividend-paying stocks still can fall 50% or more in bear markets.
- Dividends alone don't protect stocks from severe market downturns.
Boost Balanced Portfolio with Small Caps
- Adding a small cap value fund to a balanced portfolio boosts returns moderately.
- Adjust small cap exposure over time towards target date funds as you age.