Get Rich with Dividends: A Proven System for Earning Double-Digit Returns

How Do Bonds Compare?

Income investors like bonds because of their steady income and the reliability that investors can get their principal back when the bond matures.

Whether we’re talking about treasuries, munis, or corporates, if you buy a bond, there’s a very good chance you will get your money back.

Between 1925 and 2005, investment-grade bonds paid back bondholders 99.7% of the time. The default rate on higher-yielding junk bonds was 6%. So historically, junk bond investors have a 94% chance of getting their money back (although during the peak of the Great Recession, default rates in junk bonds climbed to 13%).

As I showed you earlier, over the past 74 years, stocks were positive 91% of the time— about the same success ratio as junk bonds. But wait, junk bond investors got their money back only 94% of the time, while stock investors made money 91% of the time.

Furthermore, when you receive an interest payment from a bond, there is no way of making that income grow as the years go by. If you bought a ten-year corporate bond yielding 6%, you’ve agreed to lend the company money at a 6% interest rate.

If the company invents the next iPhone and profits explode higher, you’ll receive 6%. If business is in the toilet, you receive 6%.

And when you get that check in the mail, the only way you’re going to turn it into more money is if you find another place to invest it—an activity that’s going to cost you time for sure and likely money.

If in ten years you absolutely have to have ...