Stocks vs Bonds

Generally yes, but "safer" comes with trade-offs. Government bonds are extremely safe - the US government has never defaulted on its debt. Corporate bonds vary based on the company. However, bonds typically return less than stocks over time. Stocks averaged about 10% annually over the past century, while bonds averaged about 5%. Safety has a price.

Yes, in several ways. If you sell a bond before it matures and interest rates have risen, your bond is worth less. If a company goes bankrupt, corporate bondholders might not get all their money back (though they get paid before stockholders). And if inflation is higher than your bond's interest rate, you lose purchasing power.

A classic rule of thumb is "your age in bonds" - so a 30-year-old might have 30% bonds, while a 60-year-old has 60%. But this is just a guideline. If you have a high risk tolerance and a long time horizon, you might hold fewer bonds. If you need stability and can't stomach big swings, hold more.

Imagine you own a bond paying 3% interest. If new bonds start paying 5%, nobody wants your 3% bond at full price anymore. To sell it, you'd have to discount the price. This inverse relationship between interest rates and bond prices is important to understand before investing.

It depends on your goals and risk tolerance. Many young investors go 100% stocks because they have decades to recover from downturns. But some bonds (even 10-20%) can reduce portfolio volatility and give you stable assets to rebalance from during stock market crashes. There's no single right answer.