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    Stocks and Bonds

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    Bonds and stocks are very similar securities in many respects. For example, market value of both are determined by their expected future cash flows; and both show price sensitivity- some more, some less- to a set of common market factors. At the same time, some may even go further and state that when it comes to portfolio investing details, there is really no difference between the two either. What do you think? Do you think that investing in financial assets is just investing and it does not matter whether we are talking about bond portfolios or stock portfolios? What advice would you give to your clients?

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    https://brainmass.com/business/bond-valuation/stocks-and-bonds-64692

    Solution Preview

    Please see response attached. I hope this helps and take care.

    RESPONSE:

    Most investors recommend balancing the ratio between stocks and bonds is often recommended as one way to control the risk factor associated with stocks.Most investors recommend too use bonds to add stability to their stock portfolio, but you are asked to take a position, so let's look at some examples that might be of help in this process).

    Now, let's expand on these above ideas, and investigate the advice of one investor from which you can draw your own conclusions for this question:

    Bond/Stock RatioInvestors use bonds to add stability to their stock portfolio. Bonds offset the inherent volatility of stocks with their predictable returns and relative security. There are several ways to determine the proper stocks to bonds ratio in your ...

    Solution Summary

    This solution identifies the similarities and differences between stocks and bonds. It also evaluates the idea that investing in financial assets is just investing and it does not matter whether we are talking about bond portfolios or stock portfolios. Based on this, it then suggests advice to clients.

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