Warren Buffett explains the relationship between bonds and stocks in a CNBC interview: If you buy a 30-year government bond, it has a whole bunch of coupons attached … And the coupon says 3%, or whatever. And you know that’s what you’re going to get between now and 30 years from now. And then they’re going to give you the money back. What is a stock? A stock is the same sort of thing. It has a bunch of coupons. It’s just they haven’t printed the numbers on them yet. And it’s your job as an investor to print those numbers on it. If those numbers say 10% and most American businesses earn over 10% on tangible equity. If they say 10%, that bond is worth a hell of a lot more money than a bond that says 3%. But if that government bond goes to 10%, it changes the value of this equity bond that, in effect, you’re buying … when you buy an interest in anything, you are buying something that, over time, is going to return cash to you … And those are the coupons. And it’s … your job as an inves...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.