Question

10. What are some concerns you might have about owning stocks and 10-year government bonds over the next 12 months? Support your outlook and concerns with citations from primary sources such as economist’s reports or investor surveys.

Answer 1

Owning stock is advisable in case economist's reports or investor surveys about Industry and market is favorable. It means there is sufficient demand for good and services in the near future.

If it is there owning stock will not only yield regular income in the form of a dividend but also capital appreciation in the form of an increase in stock prices.

Here the more risk in expectation of more return will prevail.

The only concern shall be if macroeconomic factors get changed and become adverse to industry and market in that case owning stock may result in losses.

Whereas owning 10-year government bonds not only provide safety and security to capital but also ensures regular income in the form of fixed coupon irrespective of fluctuation in macroeconomic factors.

So the concern about owning stocks or 10-year government bonds is all about the perception in the next 12 months about change in macroeconomic factors along with the risk-taking ability if investors have time horizon less than one year but in case of long term time horizon ,owning stock is better as in long run the risk measured in terms of volatility gets neutralized and the probability of capital appreciation is increased.