Avoid Bonds, Buy Dividend Stocks Instead

There’s a great deal of analysis regarding how much of an investor’s portfolio should be devoted to bonds. Many financial pundits believe an individual’s bond holdings should correlate strongly to a person’s age, and rise over time as that person gets older. Others believe in varying levels of bond holdings within a well-diversified portfolio.

Consider that the ten-year Treasury Bond, even after a strong price decline in recent weeks, still yields just 2.1%, and that inflation is projected to run at about 2% going forward according to the Federal Reserve. That means that buyers of the 10-year bond are just barely breaking even in terms of purchasing power. Many of the market’s best stocks, on the other hand, raise their dividends over time, thereby allowing you to receive a perpetually increasing income stream.

Source: Motley Fool

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