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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Will bonds beat stocks this century? Date: 4/14/2004 9:41 PM
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So far this century, bonds have outperformed stocks. While interest rates are low historically right now, so are stock dividend and EPS numbers. Stocks are just as expensive as bonds, in other words.

In the 20th century, especially when the bond bear market of 1940-80 is factored in, stocks outperformed bonds. But is there any reason why this might reoccur in the 21st century?

You should expect a greater return from stocks than bonds before adjusting for risk because stocks are riskier- if the issues goes bankrupt, bondholders get paid before shareholders, for example.

But on a risk adjusted basis, when you hold a diversified portfolio stocks/bonds and factor defaults into the mix, will stocks still outperform? Is there anyhthing magic about them?

I welcome any thoughts on this. Thanks.

Nick
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