Investors are now exposed to sizable losses in investments typically heralded as safe. The value of bonds and shares of bond ETFs and bond mutual funds are increasingly at risk. The objective of this article is twofold 1.) Enable the reader to set appropriate asset allocations to meet their investment goals in today's economic environment; 2.) Enable the reader to understand the bond term "duration" and make informed decisions to protect capital in an upcoming era of rising interest rates. Strategic moves and specific action items can decrease your risk of loss significantly; this article presents these.
Creditworthy corporations, exemplified by firms like Johnson & Johnson (JNJ) and Microsoft (MSFT) provide more income to stockholders with dividends than to those buying their bonds. In addition, for the top tier of dividend growth stocks, the dividend increases year after year, through good times and bad. This, of course, counters inflation in a way no fixed income investment can - not even Treasury Inflation Protected Securities (TIP). In fact, investing in those bonds can be dangerous to your financial health.
Source: Seeking Alpha
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