Bonds have performed so strongly that some investors now question “why they should take the risk of investing in stocks if lower risk bonds have higher rewards,” Janet Brown writes in her latest post for the Forbes Intelligent Investing blog.
Janet looks back at the long-term returns of stocks versus bonds from 1925 through 2011 to show that “when you take a longer view, you can see that stocks have added tremendous value.” Stocks have outperformed bonds for every 25-year period from 1925 through 2011. The last 25-year period, from year-end 1986 to year-end 2011, had the lowest excess stock returns – but stocks still managed to beat bonds by about 2% a year on average.
“This isn’t to say that you shouldn’t also invest in bonds” Janet writes. “Bonds can be a good buffer against the volatility of stocks and they can be a good option for investors with a shorter time horizon.”
(To read all of Janet’s posts on the Forbes Intelligent Investing blog, click here).