Webcast excerpt: The difference between bonds and dividend-paying stocks

Joseph B. Hash

Transcript … You see this actions that comes about quite a little bit when you are in a lower interest charge ecosystem, people are hoping to get added produce. But the matter you have to try to remember is that when you very own a stock, irrespective of whether or […]

Transcript

… You see this actions that comes about quite a little bit when you are in a lower interest charge ecosystem, people are hoping to get added produce. But the matter you have to try to remember is that when you very own a stock, irrespective of whether or not it’s a true estate investment decision have confidence in, a superior-dividend-yielding stock or fund, it is an fairness.

So when you have a downturn in the fairness market place, you are likely to see the principal price in all those forms of investments decline quite significantly. So, all over again, indeed, it’s an revenue-producing asset having said that, from a diversification standpoint, it will not hold up the way a bond will hold up in a downturn in the market place. And you do want that diversification to support you minimize some of the volatility in your total portfolio.

So it’s a little something that investors have to be pretty cognizant of. When they are getting on that added hazard, there is a consequence related with it, and they could see some sizeable principal erosion that will come alongside with that in a downturn.

Essential details

All investing is subject to hazard, which includes the feasible reduction of the money you devote.

Diversification does not guarantee a revenue or secure versus a reduction.

Investments in bonds are subject to interest charge, credit history, and inflation hazard. 

© 2021 The Vanguard Team, Inc. All rights reserved.

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