[gorgonian]

As others have pointed out, bonds are barely (or not) keeping up with inflation. I would like to suggest a third alternative to stock index and bonds: stable dividend stocks. They should increase in value along with inflation but still pay out a steady dividend as long as the company is strong.

[throwaway2037]

    > As others have pointed out, bonds are barely (or not) keeping up with inflation.

I see this sentiment a lot, but the stats do not hold up. For example, the annual inflation rate in the US in 2025 was 2.7%. That number comes from the US Bureau of Labor Statistics.

For looking at corporate bond rates, it is useful to consider the Bloomberg US Aggregate Bond Index (aka "the Agg"). It has a weighted average maturity of about 8 years (intermediate-term), currently has a yield-to-maturity of about 4.75%.

Everytime I see a debate of stocks vs bonds on the Internet, someone pops into the convo to remind everyone about "stable" dividend stocks. Honestly, for sophisticated investors, I just to don't see this strategy frequently deployed. It seems more like talking heads on the Internet. Has anyone done backtesting on performance of high div stocks vs some combination of S&P 500 and investment grade corp bonds? I would expect the latter to greatly outperform.

[zie]

Very different risk profiles.

Bonds are about steady cash flow, not about total return. "stable" dividend stocks are almost never really stable when the financial world crashes.

[throwaway2037]

    > "stable" dividend stocks are almost never really stable when the financial world crashes.

Completely agree. Also, many div stocks are just one industrial accident or scandal away from a huge drop in their stock price. People who tout preferred shares are in a similar camp in my opinion. As we discovered in 2008/2009, during a crash, there is no where safe except cash. Suddenly, all financial assets have a correlation of 1.0.

[oezi]

With the big caveat that strong dividend yields can be an indicator that the market is considering the company to do poorly in the future.

[riffraff]

Buy inflation linked bonds? They won't yield much above inflation but if you have >1M that's enough to last through retirement.