Given the recent run-up in stock markets, we thought it would be useful to review the case for including bonds and other income generating assets in an investment portfolio. Over time, publicly traded stocks generally earn higher rates of returns than corporate bonds and other loan-oriented investments. This is almost a fundamental law of finance in the much the same way that gravity is an indisputable force of nature. Beyond offering a fixed maturity date and an established rate of interest, the basic reason that corporate bonds earn lower returns is that in the event of bankruptcy, bondholders are entitled to receive [...]
There are trillions of dollars in negative yielding bonds trading right now – literally thousands of investors paying borrowers to take their money. How did the "financial upside down" become a new norm in the world and what happens when interest rates start to move higher?