With the stock market exhibiting intense volatility and meager returns in recent years, many investors have flocked to bonds.
And bonds are indeed in the midst of a 30-year rally. But that bull market may be coming to an end. Investment luminaries, such as Jeremy Siegel and Jack Bogle, tell The Wall Street Journal that now isn’t the time to abandon stocks for bonds.
Siegel, a professor at the University of Pennsylvania, is a huge advocate of dividend stocks.
"The bond outlook is extraordinarily bad," he says.
Bonds are overvalued, just like stocks were at the end of the 1990s, Siegel says. The best real return bonds are likely to provide over the next 20 years is zero, and a negative return is more likely, he says.
As for Vanguard Group founder Bogle, "I certainly wouldn't get out of the stock market," he says. "The risks we face today are deeply serious, but the odds are that stocks will do better" than bonds.
So what then should investors who are looking for income do? Several sectors of the equity market provide hefty yields. First, there are the dividend stocks recommended by Siegel. Some blue-chips offer yields of more than 5 percent.
Many master limited partnerships, which generally consist of oil and gas pipelines, have yields of more than 5 percent too. And some top real estate investment trusts (REITs) generate yields of more than 4 percent.
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