Stocks vs. Bonds – Which is the Better Bet?

a to a+

Consider this extreme example.

You have won a special lottery of $1,000,000.  You have 2 choices:

  1. 100% of the proceeds go into an S&P 500 Fund and you can receive the dividends annually.  The dividends today are 1.4% of $14,000.  At the end of 10 years, you would receive shares of the S&P 500 Index Fund
  2. 100% of the proceeds are placed into a 10-year treasury bond backed by the full faith of the U.S. Government and you can receive the interest annually. The 10-year treasury currently pays interest at 1.6% or $16,000.  At the end of 10 years, you would receive $1,000,000

Interesting dilemma…

The S&P 500 has a dividend growth rate of 6% since WWII (dividends are NOT guaranteed).

In the above example, dividends from the S&P 500 index fund would total $184,527 vs. receiving the guaranteed $160,000 from the 10-year treasury.

Which would you choose?

For me, I will take the S&P 500 Index Fund and bet on a diversified portfolio of companies for the long run.


Information in this material is for general information only and not intended as investment, tax, or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing. All investing involves risk including loss of principal.

LPL Tracking #1-05137551The Million Dollar Question

Subscribe to Dollars and Diagrams

Did you enjoy this?

Subscribe to Dollars & Diagrams for more!

More Guidance from Know My Plan

Dollars and Diagrams

Access and Flexibility Matter in Financial Planning

Often, financial plans are portrayed as rigid directives focused solely on maximizing every possible tax benefit. However, true success requires a plan tailored to your individual needs and aspirations. Are you and your financial plan equipped with the flexibility you truly deserve?

Read More »
Your custom one-page financial plan

It all starts with a conversation

And walk away with a FREE financial plan!