Bonds Have Beaten Equities Over the Past 25 Years

By on March 27, 2009

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Roger Nusbaum comments on an article (free with registration) written by John Authers for the Financial Times. The gist is that equities have been a big disappointment for anyone who held them over the long term through the recent downturn.

Mr. Authers points out, “US stocks have fallen more than 60 per cent in real terms since the market peaked in 2000. Anyone who started saving 40 years ago, when the postwar “baby boom” generation was just joining the workforce, has found that stocks have performed no better than 20-year government bonds since then, a forthcoming article by Robert Arnott for the Journal of Indexes shows.” Authers further writes regarding equities, “the problem is that they can perform worse than bonds for periods longer than a human working lifetime.”

Average returns for equities have been subject to wide swings indicating flaws in the efficient market theory. The long term will not necessarily save investors because the future is unpredictable.

The article is long and well worth reading.



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