Stocks vs. Bonds, What's Better

Interest rates are falling for Treasury bonds, beloved for their safety and steady payout. The stock market is wobbling, and equity prices may fall further if the economy continues to weaken. Since most portfolios contain an element of both asset classes, what's an investor supposed to do now? It may seem like there's nowhere to turn. Interest rates on 10-year Treasurys, the kind retirees like to sock away in their portfolios, have fallen from 3.84% at the beginning of the year to 2.72% now. The S&P 500 is down 1.11% for the year, but off nearly 11% from its 52-week high.

Lawrence Carrel, author of Dividend Stocks for Dummies, says current market conditions raise the appeal of high-dividend stocks. "In a volatile environment, where the stock market can go down and bonds are paying extremely low interest, a good place to beat the rate of return on bonds is dividend stocks," Carrel says. "If you can get potential upside in your investment at a yield that is 60% to 100% better than the 10-year Treasury, why wouldn't you take it?"

Source: Daily Finance

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