Stocks and Bonds: Potential Return

Stocks and bonds have different characteristics and aspects involved. Both are great investment opportunities and can be used to enrich your investment portfolio and produce a good return on investment ratio. Comparing potential returns of these two investment options, you will see that each option has distinct character and potential return attached to it.

The S&P 500 Index stocks, used mainly to represent well-performing stocks, will give you an average return of 9% to 10% annually — remember that the number is generally averaged from 50-year performance data. Bonds, on the other hand, offers an average return of 6% to 7% annually — also calculated from 50-year performance data. As you can see, stocks are generally more profitable.

By keeping the potential return described above in mind, constructing your portfolio to produce the highest potential return without risking too much of your investments can really be done quite easily. Stocks are usually more volatile with possible ups and downs along the way, while bonds’ increases of value are more gradual along the years especially when you purchase protected bonds such as the one issued by the government.

The differences in potential return between the two are not that big, so you can use both investments option combined to produce an even more profitable investment portfolio.