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Any opinions on which will outperform and why?

I want to allocate part of my 401K but can't decide the split between bonds and cash. This is not money I'll need for the next 10 years so I am only looking to maximize paper returns (i.e. I'll be putting in new money and reallocating existing money but won't take out any money).

I don't have an option of buying individual bonds, only short-term and long-term bond funds. Quality of bonds is not a consideration since my choices are so limited.

Pros for buying bonds / cons for putting in cash:
- Bond fund yields are very low but cash/CD is much lower.
- The Fed has kicked the inflation can down the road successfully, time and again. Bonds may not go down at all in the next 5 years.
- Since I don't need to sell the fund, I can DCA (dollar-cost average) into bond funds so that the total yield looks decent even if I overpay now.

Cons for buying bonds / pros for putting in cash:
Inflation, inflation, inflation.



To some extent this is tea-leaf reading but that's why predicting the future is hard (and fun :-)) I am hoping the "predictive market" meme mentioned in the MIT study Wendy posted on METAR works better than my brain alone will.
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