Apple (AAPL) stock is one of the most talked-about securities in the world, and with good reason. It's consistently the most valuable company by market capitalization in the U.S. equity market. Apple has also become one of the largest bond issuers in the market, with dozens of bond offerings.
As a result, investors who are also Apple enthusiasts can purchase Apple stocks and bonds. But which option is better?
Key Takeaways
- Apple stock experiences much more volatility than the bonds Apple offers.
- Apple bonds don't offer a particularly compelling value, but they are arguably nearly as safe as any government bonds.
- Apple bonds have had a modest yield advantage in the past, but AAPL stock makes the better option for long-term total-return potential.
AAPL Stock vs. Apple Bonds: Which Is Better?
Every investor has their own specific goals andrisk tolerance. Apple stock has more to offer than its bonds. However, the stock also experiences much more volatility. That means that it isn't a good choice for those who want low-risk investments.
But what if you're not bound by a conservative investing strategy? Then it's likely that investing in Apple stock will bring you a better return than Apple's bonds.
Apple Bonds
In general, Apple bonds trade with very low yield spreads over comparable Treasurys supporting their creditworthiness. But it also means that the bonds have a high degree of interest-rate sensitivity. For those who hold the bonds until maturity, that isn't a problem—they ride out the interest rate fluctuations.
However, if you need to sell the bonds before they mature, you're exposed to interest risk. Federal Reserve actions or other factors tend to put pressure on the bond market in the short-term. For example, the long-running, low-interest-rate environment that followed the 2007 to 2008 financial meltdown eventually gave way to 2022 rate increases designed to halt inflation. As rates rise, the yields on bonds usuallyfall. So, if you buy an Apple bond that you have to sell before maturity, you might get stuck trying to unload them when higher Fed rates make your bonds less valuable.
As for choosing between Apple's long- and short-term bonds, the general rule of thumb is that longer-term bonds are better than shorter-term bonds when yields fall, and the opposite is true when yields rise. Additionally, investing in Apple's longer-term bonds requires confidence that the company will continue innovating and offering products that consumers want. Basically, you want the company to still be in business when your bond matures. Fortunately, Apple usually has enough cash on hand to make its odds of long-term survival high. This is likely true even if it falls behind the technology curve in the years ahead.
Apple Stock
At certain points in Apple's history, you'd get a better yield out of an Apple bond than you would from Apple stock's dividend yield, though it's important to remember that both yields change daily with price fluctuations.
This means that investors would tend to earn more income with bonds, but this comparison fails to account for the possibility of future dividend growth. It's likely that Apple will boost its dividend over time.
Also, an investor who owns Apple bonds doesn't participate in the company's earnings growth. As the company's earnings grow, it's might increase the dividends you earn from being a stockholder. Finally, AAPL stock is more easily traded than its bonds due to a more liquid market.
Together, these factors indicate that while Apple bonds have a modest yield advantage, AAPL stock makes the better option for long-term total return potential. Stocks also have the potential for dividend growth and give investors the ability to participate in the company's earnings growth.
The Bottom Line
For one of the world's largest companies, Apple stock has a history of volatility. From July 2015 to May 2016, it lost around 30% of its value. From March 2022 to June 2022, the stock's price dropped around 25%. Investors should consider this volatility when thinking about making a stock investment in Apple. This is even more true for those in or nearing retirement.
Frequently Asked Questions (FAQs)
Does Apple have bonds?
Yes, Apple offers bonds. The company has a history of issuing a variety of bonds to help fund various aspects of its business.
When should you buy stocks vs. bonds?
Generally speaking, stocks are better suited for those who are comfortable with risk. Bonds tend to be very safe and typically offer relatively low returns compared to the stock market.
The Balance does not provide tax, investment, or financial services or advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circ*mstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.
FAQs
As you can see, each type of investment has its own potential rewards and risks. Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns.
Is it worth it to buy Apple stock? ›
With its 3-star rating, we believe Apple's stock is fairly valued compared with our long-term fair value estimate of $160 per share. Our valuation implies a fiscal 2024 adjusted price/earnings multiple of 25 times, a fiscal 2024 enterprise value/sales multiple of 7 times, and a fiscal 2024 free cash flow yield of 4%.
Do stocks or bonds give the highest return? ›
Stocks have historically delivered higher returns than bonds because there is a greater risk that, if the company fails, all of the stockholders' investment will be lost (unlike bondholders who might recoup fully or partially the principal of their lending).
Is Apple a safe long-term investment? ›
Despite recent headwinds, Apple remains a leader in tech with dominating brand power and immense financial resources. A recent stock dip could be the perfect time to make a long-term investment in its business and profit from its potential over the next decade.
Why would someone buy a bond instead of a stock? ›
Bonds are more beneficial for investors who want less exposure to risk but still want to receive a return. Fixed-income investments are much less volatile than stocks, and also much less risky.
Why invest in bonds than stocks? ›
Stocks offer ownership and dividends, volatile short-term but driven by long-term earnings growth. Bonds provide stable income, crucial for wealth protection, especially as financial goals approach, balancing diversified portfolios.
What will AAPL be worth in 5 years? ›
We expect the stock to reach $237 per share by the end of 2025. End of 2026: We predict that Apple's stock price could further increase to $298, driven by continuing interest rate reductions. End of 2030: Apple could reach a market cap of $8.7 trillion by 2030, representing a share price of $561.
Is Apple a good buy for 2024? ›
(Bloomberg) -- Apple Inc. was named a top pick for 2024 at Bank of America on optimism over the iPhone maker's upcoming results, as well as its longer-term prospects. The company has a “rich catalyst path with defensive cash flows,” wrote analyst Wamsi Mohan, who has a buy rating and $225 price target on the stock.
Is Apple a buy or sell right now? ›
Apple stock has received a consensus rating of buy. The average rating score is Aaa and is based on 67 buy ratings, 30 hold ratings, and 2 sell ratings.
How much should I have in stocks vs bonds? ›
The 90/10 rule in investing is a comment made by Warren Buffett regarding asset allocation. The rule stipulates investing 90% of one's investment capital toward low-cost stock-based index funds and the remainder 10% to short-term government bonds.
Bonds tend to be less volatile and generally outperform stocks during a recession. A bond is essentially a loan. Whether you get your investment back depends on the issuing entity repaying that loan.
When to move from stocks to bonds? ›
During a bear market environment, bonds are typically viewed as safe investments. That's because when stock prices fall, bond prices tend to rise. When a bear market goes hand in hand with a recession, it's typical to see bond prices increasing and yields falling just before the recession reaches its deepest point.
What will Apple stock be worth in 3 years? ›
The analyst community also believes Apple shares should be worth nearly $200 apiece a year from now, up more than 17% from their present price.
What will Apple stock be worth in 10 years? ›
In 2030, the Apple stock will reach $ 793.25 if it maintains its current 10-year average growth rate. If this Apple stock prediction for 2030 materializes, AAPL stock will grow 331.71% from its current price.
What could Apple stock be worth in 10 years? ›
Apple long term stock forecast is anticipated to be $315 in 2025, $370 in 2026, $425 in 2027, $465 in 2028, and $480 in 2029. In 2030, analysts anticipate Apple shares will be worth $510.
How much should I invest in stocks vs. bonds? ›
One says that the percentage of stocks in your portfolio should equal 100 minus your age. So, if you're 30, such a portfolio would contain 70% stocks and 30% bonds (or other safe investments). If you're 60, it might be 40% stocks and 60% bonds.
Do bonds outperform stocks? ›
From 1982 through 2019 (pre-COVID), while stocks outperformed, the results were much closer to the first 150 years than the previous 40 – the S&P 500 returned 11.8% per annum versus 9.5% per annum for long-term (20-year) Treasury bonds.
What percentage of portfolio should be bonds? ›
The rule of thumb advisors have traditionally urged investors to use, in terms of the percentage of stocks an investor should have in their portfolio; this equation suggests, for example, that a 30-year-old would hold 70% in stocks and 30% in bonds, while a 60-year-old would have 40% in stocks and 60% in bonds.
Should you buy bonds when interest rates are high? ›
Should I only buy bonds when interest rates are high? There are advantages to purchasing bonds after interest rates have risen. Along with generating a larger income stream, such bonds may be subject to less interest rate risk, as there may be a reduced chance of rates moving significantly higher from current levels.
