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I have been told by Financial advisors that I have to diversify in stocks and bonds to reduce risk of losing money in stocks.

I have attached the chart of DOW and 10 Year Treasury note below.

My questions are:

  1. When the DOW fall, does not the Bond value go higher?
  2. Is 10 Year Treasury Yield and the Bond Value the same?
  3. If 10 Year Treasury Note the same as Bond, from the two charts both the Stock Market and Bond are going low. Rather it should be opposite like stocks go down but the Treasury Yield go higher?

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3

Sometimes the market and the long bonds correlate, sometimes not. Note the period of 2016 to 2020. In the first two years, yield was rising while the market rose and in the latter two years, yield dropped while the market rose.

Here's 20 years of the DJIA:

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Here's 20 years of the 10 year bond:

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  • But since bond prices rise when yields fall, that would support the notion that "bonds ... reduce risk of losing money in stocks". – RonJohn Feb 27 at 1:01
1

When the DOW fall, does not the Bond value go higher?

No. Bond values are -- by the nature of mathematics and our desire to get a fair rate of return -- inversely correlated to interest rates:

  • when interest rates fall, the value of a bond rises;

  • when interest rates rise, the value of a bond falls.

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