The major question we shall have to deal with grows out of the huge rise in the rate of interest on first-quality bonds. Since late1967 the investor has been able to obtain more than twice as much income from such bonds as he could from dividends on representative common stocks. At the beginning of 1972 the return was 7.19% on highest-grade bonds versus only 2.76% on industrial stocks. (This compares with 4.40% and 2.92% respectively at the end of 1964.) It is hard to realize that when we first wrote this book in 1949 the figures were almost the exact opposite: the bonds returned only 2.66% and the stocks yielded 6.82%.2 In previous editions we have consistently urged that at least 25% of the conservative investor’s portfolio be held in common stocks, and we have favored in general a 50–50 division between the two media.

 

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The major question we shall have to deal with grows out of the huge rise in the rate of interest on first-quality bonds. Since late
1967 the investor has been able to obtain more than twice as much income from such bonds as he could from dividends on representative common stocks. At the beginning of 1972 the return was 7.19% on highest-grade bonds versus only 2.76% on industrial stocks. (This compares with 4.40% and 2.92% respectively at the end of 1964.) It is hard to realize that when we first wrote this book in 1949 the figures were almost the exact opposite: the bonds returned only 2.66% and the stocks yielded 6.82%.2 In previous editions we have consistently urged that at least 25% of the conservative investor’s portfolio be held in common stocks, and we have favored in general a 50–50 division between the two media.

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