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Subject:  Risk and Reward Date:  7/24/2012  12:46 PM
Author:  trader2012 Number:  34263 of 37017

Typically, bonds (as an asset-class) offer less return than stocks (as an asset-class), because the latter carry more uncertainty. Thus, to identify oneself as stock investor (or a bond investor) is merely to identify one’s appetite for risk. If you love risk, you buy stocks. If you hate risk, you buy bonds. Very simple, right?

How is each asset-class faring in the current market? As measured by a broad market index, such as the SP500, the average stock investor lost an average of 0.89% yesterday. As market moves go, that isn’t huge. But given that today might be a repeat performance, the losses begin to become worrisome.

How did the average bond investor fare yesterday? If the composition of his/her portfolio reflects the Barclays Aggregate Index, then he/she gained 0.089%. If the portfolio holds junk bonds, then that potion gained even more, probably something around 0.10%. As market moves, go, both of those daily gains are tiny. But if that’s what can be gained on a down day for stocks, then the moves aren’t shabby at all.

My own portfolio (mainly bonds, but some equity experiments, too) lost -0.015. But I'm content to sit tight and let things ride.
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