answersLogoWhite

0


Want this question answered?

Be notified when an answer is posted

Add your answer:

Earn +20 pts
Q: Why do stocks tend to be riskier investments than bonds?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Continue Learning about Finance

How To Invest For Income Using Stocks?

When people think of investing for income, they usually think first about bonds, CDs or money market funds. That makes sense because each of these investments quotes a yield and pays out income on a regular basis whether it’s monthly or every six months. It’s easier using these investments because you kind of know what you’re getting. What some people don’t know is that you can use stocks for the same purpose. Many larger companies pay out dividends on a quarterly basis and those dividends can be used as a regular source of income as well. One of the perks, especially nowadays, is that depending on the company and type of stock you may be purchasing many stocks sport yields that are as competitive as or even more competitive than bond or CD yields. Now, that yield that comes with owning stocks can come with a caveat as well. Bonds, bond funds and CDs tend to have more of a stable value. Bonds and bond funds may have some fluctuation in value but the majority of the return you see tends to be in the form of income. The opposite can be true of stocks. Stocks may produce a steady dividend yield but you need to own the stock in order to get it and stock ownership comes with all of the daily price fluctuations that you’d come to expect from equity investments. Stocks can produce great dividend yields but be sure that you’re willing to take the risk that comes with investing in stocks in general. A good year in the market could enhance the return you get in dividends quite a bit but a down year, like some of the ones we’ve experienced recently, could wipe out of your dividend gains and then some. When looking for yield, don’t just look at the usual suspects. Investing in stocks for income could enhance your investment’s return will reducing your portfolio’s overall risk. It could be a winning combination!


What are some of the dangers of bond investing?

Buying bonds consists of loaning money, usually to an entity like a government. As governments tend to be fairly stable, this is a relatively low-risk investment. The greatest drawback to bonds may be their consistency; unlike other investments, they are unlikely to jump in value in response to large market fluctuations.


When the Federal board engages in a tight money policy the price of government bonds tend to?

fall


What statement describes a pair of stocks that meet this recommendation?

Investment counselors recommend buying stocks whose returns show a negative correlation in order to minimize the risk of big losses. ANSWER: A stock whose returns tend to increase when the returns of a second stock are decreasing.


What should you do if interest rates rise?

This is a pretty open ended question. I'll answer it from the perspective of investing. Rising interest rates directly impact bond performance. Generally speaking, if interest rates rise the value of bond investments fall. Not all bond investments have the same sensitivity to changes in interest rates, but most have at least some. Longer bonds tend to be more sensitive to interest rate changes than shorter bonds, and credit sensitive bonds like corporate bonds tend to be less sensitive to changes in interest rates. As far as actions to take when interest rates rise goes, it really depends on the investors situation. If an investor isn't comfortable the level of volatility that they are experiencing, then a change in the strategy may be needed. Unfortunately, prices have already fallen, so having to change strategy after a period of rising interest rates goes against the strategy of buying low and selling high, but interest rates could keep rising so it's important to consider your risk tolerance going forward. Higher interest rates can also have an effect on stock prices. As the interest rates rise, the cost of borrowing for companies goes up and eats into earnings. Sometimes those higher costs can be passed along to customers, but often times they can't. Rising interest rates often cause pullbacks of 10-20% and can even cause minor recessions. The effect on stocks could be exasperated by the extremely low levels of interest rates currently in the market.

Related questions

What does the website Scottrader provide?

The Scottrader website provides a brokerage service for its clients. These tend to be that related on stocks, bonds and funds such as mutual funds and derivatives.


Do molecular bonds have very strong bonds?

they tend to have strond bonds


wHA ARE tAXABLE mUNICIPAL bONDS Are they suitable for IRA investments. Why are they issued compared to Tax Exempt Municipal Bonds?

Taxable municipal bonds are bonds issued by governments (municipal bonds) that are NON-tax exempt (most munis are.) They are often better for IRA investments than tax-exempt bonds because they tend to pay higher interest rates and IRAs are tax exempt anyway. They are issued for a variety of reasons (often, they don't count against a bond issuers' cap) but, in part, because they are a good investment vehicle for IRAs and other tax exempt accounts.


Why do group 4a elements tend to form covalent bonds?

Why does group 4A elements tend to form covalent bonds rather than ionic bonds? 


How well do internet stocks sell?

Internet stocks tend to have a high value; therefore, internet stocks sell for a lot of money. Internet stocks such as Ebay and Google have some of the highest values.


How To Invest For Income Using Stocks?

When people think of investing for income, they usually think first about bonds, CDs or money market funds. That makes sense because each of these investments quotes a yield and pays out income on a regular basis whether it’s monthly or every six months. It’s easier using these investments because you kind of know what you’re getting. What some people don’t know is that you can use stocks for the same purpose. Many larger companies pay out dividends on a quarterly basis and those dividends can be used as a regular source of income as well. One of the perks, especially nowadays, is that depending on the company and type of stock you may be purchasing many stocks sport yields that are as competitive as or even more competitive than bond or CD yields. Now, that yield that comes with owning stocks can come with a caveat as well. Bonds, bond funds and CDs tend to have more of a stable value. Bonds and bond funds may have some fluctuation in value but the majority of the return you see tends to be in the form of income. The opposite can be true of stocks. Stocks may produce a steady dividend yield but you need to own the stock in order to get it and stock ownership comes with all of the daily price fluctuations that you’d come to expect from equity investments. Stocks can produce great dividend yields but be sure that you’re willing to take the risk that comes with investing in stocks in general. A good year in the market could enhance the return you get in dividends quite a bit but a down year, like some of the ones we’ve experienced recently, could wipe out of your dividend gains and then some. When looking for yield, don’t just look at the usual suspects. Investing in stocks for income could enhance your investment’s return will reducing your portfolio’s overall risk. It could be a winning combination!


What are clues for ionic and covalent bonding?

A metal bonding with non-metals tend to form ionic bonds, a non-metal that bonds with another non-metal tend to form covalent bonds.


What are some of the dangers of bond investing?

Buying bonds consists of loaning money, usually to an entity like a government. As governments tend to be fairly stable, this is a relatively low-risk investment. The greatest drawback to bonds may be their consistency; unlike other investments, they are unlikely to jump in value in response to large market fluctuations.


Carbon atoms tend to form what bonds?

Carbons almost always form covalent bonds.


What bonds does carbon atoms tend to form?

Carbon will almost always form bonds with other carbon atoms, and that is part of what makes it such a useful element.


Why do atoms form convalent and not ionic bonds?

The difference in electronegativity determines the type of chemical bonding between atoms. Metals and nonmetals often have a large difference in electronegativity, and tend to form ionic bonds, while nonmetals bonded to nonmetals tend to have smaller electronegativities and tend to form covalent bonds.


Liquids with hydrogen bonds tend to have viscosities?

High Viscosities