Bonds and equities working together to balance portfolios
Own versus owed
When you buy shares you own part of the company. When you buy bonds you are owed money by the company. If you lend Company A $100 it owes you $100. If you buy shares in Company A you are part owner of Company A.
With bonds you receive interest and your loan is repaid at maturity. You know exactly what your income and your outcome will be. Shares are perpetual, they never mature. You buy them in the hope that the price of the share and the dividend will go up.
Companies are allowed to cut their dividends as has recently happened with Telstra shares. Companies are not allowed however, to cut their bond coupons
Bonds are predictable unlike equities which can be extremely volatile. While bonds stay steady and have a known outcome, shares are volatile but can deliver greater returns. Equities are the exciting part of your portfolio while bonds are the safe part and that is why they work well together.