When it comes to bonds, D&I Daily agrees with Wall Street guru, Peter Lynch, when he says, “In bonds, you’re nothing more than the nearest source of spare change. When you lend money to somebody, the best you can hope for is to get it back, plus interest.”
If you’re drawn to bonds because of risk aversion, dividends are a far better choice. By identifying fundamentally strong dividend payers, a savvy income investor can get the safety of bonds, but with significantly greater yields.
The recent slump in Valeant’s high-yield bonds are another example of the dangers of chasing yield. Yet investors continue to pile into junk bonds anyway.