Gary Poster, with essential assists from Galyn Norwood, Phiroon Phihakendr, Jose Quijada, Pavandeep Kalra. A bond is just a promise, and fraught with all the problems that implies. But that is only half the story.
Bonds can provide a worry-free stream of income.
Used improperly, bonds can really mess up your financial life. Handled with care, however, bonds are among the most valuable tools in your investment kit. Large company stocks have posted compound annual returns of around 11.3 percent since 1926, versus 5.1 percent for long-term U.S. government bonds, according to Ibbotson Associates. But while stocks have returned more than bonds over most of this decade, they are also more volatile. Combining stocks with bonds will net you a more stable portfolio.