Why do some investors remain invested in bonds despite the potential higher returns of stocks?

Investors often choose to remain invested in bonds primarily to avoid market volatility associated with stocks. Bonds are generally considered to be a safer investment compared to stocks, especially during periods of economic uncertainty or market downturns. They provide more stable returns, as they typically offer fixed interest payments and return of the principal at maturity. This predictability makes bonds an attractive option for risk-averse investors or those who may be nearing retirement and prefer the reliability of fixed income.

In contrast, stocks can experience significant short-term fluctuations in value, which can be stressful and financially damaging for investors who are not comfortable with high levels of risk. Many investors prioritize capital preservation and steady income over chasing potentially higher returns, leading them to favor bonds in their portfolios despite the higher returns that stocks might offer over the long term.