How Often Do Long-Term Bonds Beat Stocks?

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Stocks have outperformed (bonds) roughly 9 out of every 10 rolling 20-year periods going back more than 90 years of market history. It just so happens that one of those 20-year periods happened this century.

So it goes.

If the stock market always won over every time frame there would be no risk involved. If there was no risk involved there would be no risk premium.

The reward for owning stocks over the long haul comes from the fact that they sometimes underperform for an extended period of time and rip your face off in the short-term with bone-crushing losses.

And it’s not just long-term bonds that can outperform stocks. Here are those same numbers for cash (one-month t-bills) versus the S&P 500.

and,

this only proves the benefits of diversification. Diversification protects you from periods of poor performance by any given asset class.

Stocks are still your best bet over the long-term but not every long-term.

The stock market wouldn’t offer such wonderful long-term returns if you didn’t hate yourself for owning them at least some of the time.

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