if i have 10,000$ and i want to invest in the market for 5 years so what ahould i choice ethier to invist in 10% bond (fixed interest) or to purchase share from the and why ?

are very volatile (i.e share prices increase and decrease very frequently ) i want to knw the different betweent them and which is the best to choice with supporting assumptions

 

  • muncie birder 9:02 am on May 25, 2010

    If a bond is paying 10%, it most likely is not an investment grade bond. There are some closed end leveraged bond funds that contain mostly investment grade bonds that are paying 10%. Also some investment grade preferred stocks which are like bonds in many respects but two. There are three disadvantage to bonds. 1. The interest is taxed at the full tax rate. 2. Inflation is an absolute killer to bonds. 3. Fed policy of below market interest rates makes bonds a poor choice for most.

    As for stocks, the general run of the mill stock has not yielded 10% over the long term for quite some time and the future of stock returns does not look all that promising either. Now a particular stock may indeed yield better than 10% over the long term and I am sure that quite a few will, but your probability of finding one is about 1 chance in 5. There are a couple of tax advantages to stocks. 1. Dividends are taxed at a preferential rate as are long term capital gains. This may change shortly.

  • src50 9:02 am on May 25, 2010

    Why are your only choices "10% bonds" or stocks? Have you looked into balanced mutual funds?

  • alberto J 9:02 am on May 25, 2010

    I would invest in stocks, for two reasons.

    1 – Historically in five year windows stocks are the best investment in a very big percentage of times.
    2 – Stocks are volatile at the moment but at the current market prices I believe the worst case scenario is the stocks drop another 10%, on the other hand if you buy a bond or CDO, that goes on default you loose 100%.

    Therefore IMO stocks at the moment have less risk and far more potential upside