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Bonds don’t out perform stocks over the long term. Buying bonds makes sense for risk averse people seeking fixed income with tax advantages, or speculators pla
by devoutsalsa 3y ago
Bonds don’t out perform stocks over the long term. Buying bonds makes sense for risk averse people seeking fixed income with tax advantages, or speculators planning for a drop in interest rates. There may be a few 20 year periods where the stock market itself was flat, but anyone who had been buying during that whole time would have seen positive returns.
- ffhhttt 3y agoAlso significant inflation = higher stock prices, while your principal would only decrease in value if you buy bonds.
- devoutsalsa 3y agoI've always thought that inflation causes stocks to suffer, for a couple reasons. One, higher interest rates on government bonds means risk free interest rates can approach, or even exceed, the typical expected return for the stock market. Second, inflation reduces consumption, which reduces profits.
- ffhhttt 3y agoShort term that might be the case. However longterm (as long as the economy continues growing) you would still expect nominal earnings and revenue to increase at least at the same pace. Also it varies a lot by sector, consumer staples for instance have been doing quite well over the last year. If you have double digits inflation and can’t/don’t want to buy foreign currency the stock market is probably the best place to be. Just look at Turkey: https://tradingeconomics.com/turkey/stock-market https://tradingeconomics.com/turkey/stock-market