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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35392  
Subject: Re: Historical Returns Date: 11/8/2006 8:33 PM
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Don't you get all of your money back? i.e., 100% capital return?

Sorry, Vicki, I guess that was confusing.

By capital return, I don't mean getting back face-value/principal at maturity. I'm talking about capitals gains and losses that get calculated as part of the return. So, for example, if you look at a long bond fund, it's total return over the last 25 years is much higher than its income return (i.e., what it has paid out in dividends based on average yield), because interest rates were much higher in 1981, so the fund has had realized (paid as distributions) and unrealized (higher NAV) capital gains.

Remember a few years ago, when stocks were near the bottom and bond yields very low, long bonds had better returns over a 20 year period than stocks, even though stocks had, in fact, done very well. That was from a combination of high coupons (like 13% on 30 year Treasuries), which had been paid out for 20 years, and the increased value on the bonds, because of the high coupon for the remaining years.


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