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

Transcript

… You see this conduct that takes place fairly a bit when you’re in a minimal fascination fee ecosystem, folks are making an attempt to get more produce. But the factor you have to recall is that when you own a inventory, no matter if or not it’s a genuine estate financial investment believe in, a substantial-dividend-yielding inventory or fund, it is an equity.

So when you have a downturn in the equity marketplace, you’re heading to see the principal benefit in people varieties of investments decrease very considerably. So, yet again, yes, it’s an profits-creating asset however, from a diversification standpoint, it will not keep up the way a bond will keep up in a downturn in the marketplace. And you do want that diversification to enable you reduce some of the volatility in your total portfolio.

So it’s some thing that investors have to be quite cognizant of. When they are taking on that more danger, there is a consequence connected with it, and they could see some sizeable principal erosion that comes together with that in a downturn.

Important information

All investing is subject matter to danger, such as the achievable decline of the money you invest.

Diversification does not guarantee a financial gain or safeguard in opposition to a decline.

Investments in bonds are subject matter to fascination fee, credit history, and inflation danger. 

© 2021 The Vanguard Group, Inc. All legal rights reserved.

“Webcast excerpt: The distinction involving bonds and dividend-paying shares”, 3 out of 5 primarily based on 145 scores.