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Bonds Trample Equities

There has always been a strong perception in the investment field that equities vastly beat stocks over long periods of time (20-30 years) and in the last few years there has been a suggestion from many financial advisors that individuals in retirement should hold 70-80% in equities. I find this advice to be nonsense.

Treasuries have killed stocks since '96

Treasuries have killed stocks since '96

Even more compelling is the research from Rob Arnott at Research affiliates:

  • The equity risk premium (average expected return spread between stocks and bonds) between 1802 and February 2009 was 2.5%
  • For the last 41 years between 1968 and February 2009, bonds have beaten stocks

Please read Rob Arnott’s Piece entitled “Bonds: Why Bother?”.  I found it rather enlightening.

Bonds, Why Bother? Rob Arnott


 

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Continuing the Discussion

  1. Worst Decade Ever | SurlyTrader linked to this post on December 21, 2009

    […] Decade Ever I have been a bit against the grain with my view that allocations towards equities have been too high in many retirement portfolios, but it seems like the Wall Street Journal is jumping on board with today’s article stating […]



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