E Basics: Bonds Versus Stocks

Yet despite these two risks, bonds hold two distinct advantages over stocks. First, if a company enters bankruptcy, bondholders are paid before anyone else—maybe not much, but more than the stockholder, who is almost always wiped out. Second, municipal issuers, as opposed to corporations, very rarely default. An expert tells me that even in the Great Depression, fewer than 3% of all municipal bond issuers defaulted on their interest payments.

There is no completely safe place for our money. Stocks and bonds, like crossing the street or choosing a spouse, both require analysis of risk and reward. The longer the investing runway, the better the odds for wisely chosen stocks. The shorter the time, the odds favor carefully selected bonds. Along the way, as in life, it’s all about balance.

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Tom Jacobs is an Investment Advisor for separately managed accounts with Dallas’s Echelon Investment Management. You may reach him at more

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Dick Kaplan 4 years ago Member's comment

Finance 101 at it's finest, thanks.

Gary Anderson 4 years ago Contributor's comment

Nouriel Roubini may have a rodent proof safe which is about as safe as you can get. www.talkmarkets.com/.../summers-and-roubini-talk-negative-interest-rates-sound-logic-but-uncharted-waters But, seriously, bonds will help people sleep easier at night, IMO.