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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.

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