Shares of Johnson & Johnson (JNJ) dropped 10% on Friday, shedding $40 billion in market value to mark its worst trading day since 2002. The cause was a Reuters article claiming that insiders at J&J knew for decades that its baby powder "sometimes tested positive for small amounts of asbestos" without disclosing the issue to regulators or the public: "A Reuters examination of many of those documents, as well as deposition and trial testimony, shows that from at least 1971 to the early 2000s, the company’s raw talc and finished powders sometimes tested positive for small amounts of asbestos, and that company executives, mine managers, scientists, doctors and lawyers fretted over the problem and how to address it while failing [...]

Making money in 2018 hasn’t been easy. In fact, 90% of the 70 asset classes (covering everything from stocks to bonds and commodities) tracked by Deutsche Bank posted negative total returns in dollar terms for the year through mid-November, per The Wall Street Journal. That’s the highest percentage on record going back to 1901 (the previous high was in 1920, when 84% of 37 asset classes were negative). While a single year is not a very long period of time, the simultaneous “failure” of so many investment strategies is unusual and likely unnerving to some investors.

Over the past decade, the U.S. has seen its lowest interest rates in history which has made REITs, with their naturally high yields and low volatility, attractive so-called "bond alternatives." However, in reality, there are important differences between bonds and REITs that investors need to understand when deciding what asset allocation is right for them. Let's take a look at what these differences are, the pros and cons of each kind of asset, and most importantly, what the right mix of bonds and REITs is reasonable for a retirement portfolio.

With a 4.1% yield, Leggett & Platt (LEG) is one of the highest-yielding dividend aristocrats in the market, trailing only AT&T (T), AbbVie (ABBV), and Exxon Mobil (XOM). While the company has increased its dividend for 47 consecutive years, shares of Leggett & Platt are down more than 20% over the past year. As a result, the stock's dividend yield has increased to an unusually high level compared to its historical trading range. If nothing has changed with a company's long-term prospects or dividend safety, a relatively high yield can be a signal that a business is attractively priced.