Stocks vs Bonds

A stock is a share of ownership in a company; a bond is a loan to a company or government that pays interest and returns your money at maturity. Stocks have offered higher long-run returns with larger swings; bonds pay steadier income with smaller losses.

How they behave

Stock returns come from profits growing and being paid out; they can fall 30–50% in a bear market. High-quality bond returns come mostly from their interest; their prices move inversely with interest rates, so rising rates push existing bond prices down.

In many recessions high-quality government bonds have risen while stocks fell, which is why a mix of the two swings less than stocks alone. That relationship is not guaranteed: in 2022 both fell as inflation and rates jumped.

Choosing a mix

The usual guide is time: money needed within a few years belongs mostly in bonds and cash; money for decades away can carry more stocks. A 60/40 stock/bond portfolio is the classic middle ground.

Put it to use

Interest rates and Treasury yields today →Analyze a portfolio’s risk and mix →

General information, not investment advice.