Apple Stock vs. Apple Bonds: Which Is the Better Buy? (2024)

FAQs

Apple Stock vs. Apple Bonds: Which Is the Better Buy? ›

Together, these factors indicate that while Apple bonds have a modest yield advantage, AAPL stock makes the better option for long-term total return potential. Stocks also have the potential for dividend growth and give investors the ability to participate in the company's earnings growth.

As you can see, each type of investment has its own potential rewards and risks. Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns.

Despite recent headwinds, Apple remains a leader in tech with dominating brand power and immense financial resources. A recent stock dip could be the perfect time to make a long-term investment in its business and profit from its potential over the next decade.

Common stock tends to outperform bonds and preferred shares. It is also the type of stock that provides the biggest potential for long-term gains. If a company does well, the value of a common stock can go up. But keep in mind, if the company does poorly, the stock's value will also go down.

Bonds tend to maintain their value over the long term so that they act as a counterweight when stocks are declining. In addition, bonds generate interest income and add to the cash flow of a portfolio.

Bonds are more beneficial for investors who want less exposure to risk but still want to receive a return. Fixed-income investments are much less volatile than stocks, and also much less risky.

Other cloud computing stocks look compelling for the new year as well. And, of course, I still like semiconductor stocks, too, especially if the iPhone and other consumer electronic sales notch a rebound in 2024. To be clear, Apple looks like it has all the ingredients to continue as a great long-term investment.

Apple 10-Year Performance

Patient investors who held the stock through all of its ups and downs were rewarded with what Wall Street refers to as a “10-bagger,” a stock that provided a return of 10x the original investment. On a percentage basis, those who held Apple stock over the past 10 years earned a 916% return.

Are Apple bonds good? ›

So let's start with Apple bonds. In 2020, Apple issued a 40-year bond that matured in 2060 with an interest rate of 2.55%. At that time, that was the market interest rate on very long-maturity, very low-risk bonds. And Apple's bonds are virtually risk-free.

Bonds pay a fixed rate of interest every six months until they mature. You can hold a bond until it matures or sell it before it matures.

After bonds are initially issued, their worth will fluctuate like a stock's would. If you're holding the bond to maturity, the fluctuations won't matter—your interest payments and face value won't change.

During a bear market environment, bonds are typically viewed as safe investments. That's because when stock prices fall, bond prices tend to rise. When a bear market goes hand in hand with a recession, it's typical to see bond prices increasing and yields falling just before the recession reaches its deepest point.

Should I only buy bonds when interest rates are high? There are advantages to purchasing bonds after interest rates have risen. Along with generating a larger income stream, such bonds may be subject to less interest rate risk, as there may be a reduced chance of rates moving significantly higher from current levels.

Stocks have historically delivered higher returns than bonds because there is a greater risk that, if the company fails, all of the stockholders' investment will be lost (unlike bondholders who might recoup fully or partially the principal of their lending).

From 1982 through 2019 (pre-COVID), while stocks outperformed, the results were much closer to the first 150 years than the previous 40 – the S&P 500 returned 11.8% per annum versus 9.5% per annum for long-term (20-year) Treasury bonds.

Do Bonds Lose Money in a Recession? Bonds can perform well in a recession as investors tend to flock to bonds rather than stocks in times of economic downturns. This is because stocks are riskier as they are more volatile when markets are not doing well.

Bonds tend to be less volatile and generally outperform stocks during a recession. A bond is essentially a loan. Whether you get your investment back depends on the issuing entity repaying that loan. “Bonds, such as Treasurys, corporate bonds and municipal bonds, have contractual cash flows,” Kowalski says.