Skip to main content
No. of Recommendations: 4
2011-Q3 ended today, once again inviting comparisons between the performance of stocks (as an asset-class) versus bonds (as an asset-class). On a look-back basis, if one looks back far enough, stocks continue beat bonds. But on a very, very, very short-term basis, roughly the last 15 years, or a mere blip of time that is so short as to be irrelevant to planning portfolios (according to stock touts like Bogle), bonds (as an asset-class) have offered a competitive edge (over stocks as an asset-class) that probably shouldn’t be ignored (or denied) unless your intention in putting money at risk was merely to have a bit of fun by indulging in a socially-approved form of gambling.

To see that bonds have, indeed, done well enough over the past 15 years compared to the more conventional choice for portfolios, pull historical data for two common benchmarks, the SP500 index and Lehman’s Aggregate Bond index. But because indexes can’t be bought, nor pay dividends, pull historical data for derivatives based on those indexes that can be bought, such as Vanguard’s VFINX and VBMFX, and look at just the monthly adjusted-closes. Do one further thing. Rather than base your computations for pairwise P/L on the inception for VBMFX and move forward in time, do the opposite. Anchor your divisor in the present (by using the appropriate, absolute-cell reference in your spreadsheet), and then do a look-back asking this question:

On a backward-looking, annualized, month-to-month basis, have bonds out-performed stocks in the recent past, underperformed them, or merely scratched?
where ‘recent past’ is the past 15 years, and a ‘scratch’ is any month in which bonds neither gained, nor lost, more than 25 bps compared to bonds (and a relatively-infrequent event).

As you can see from the data below, stocks have been a very sucky asset-class UNLESS you’re one of them naughty, market-timing traders. But if you really are an investor and have been committed to holding for long time frames, then bonds have proven the better choice. Not by much, but for the last 15 years they have been the better asset-class to be broadly invested in. (I’m not arguing against the merits of fractional ownership of superior businesses. But not one in a hundred investors knows how to do it with any consistency and is really better off ‘indexing’.)


Date Years VBMFX Rev_% Rev_% VFINX Wins Scratches Losses

7/2/90 21.17 2.70 6.86% 7.85% 21.60 (-)
8/1/90 21.09 2.67 6.94% 8.36% 19.65 (-)
9/4/90 20.99 2.69 6.93% 8.66% 18.69 (-)
10/1/90 20.92 2.73 6.88% 8.71% 18.61 (-)
11/1/90 20.83 2.79 6.80% 8.43% 19.81 (-)
12/3/90 20.75 2.83 6.76% 8.32% 20.35 (-)
1/2/91 20.66 2.86 6.73% 8.13% 21.23 (-)
2/1/91 20.58 2.88 6.72% 7.81% 22.74 (-)
3/1/91 20.50 2.90 6.71% 7.71% 23.29 (-)
4/1/91 20.42 2.93 6.69% 7.74% 23.33 (-)
5/1/91 20.34 2.95 6.68% 7.55% 24.33 (-)
6/3/91 20.25 2.95 6.71% 7.83% 23.22 (-)
7/1/91 20.17 2.99 6.67% 7.62% 24.30 (-)
8/1/91 20.09 3.05 6.59% 7.53% 24.86 (-)
9/3/91 20.00 3.11 6.52% 7.65% 24.45 (-)
10/1/91 19.92 3.14 6.49% 7.61% 24.77 (-)
11/1/91 19.83 3.17 6.47% 7.87% 23.78 (-)
12/2/91 19.75 3.26 6.35% 7.32% 26.49 (-)
1/2/92 19.66 3.22 6.44% 7.45% 26.00 (-)
2/3/92 19.58 3.24 6.44% 7.42% 26.32 (-)
3/2/92 19.50 3.22 6.50% 7.56% 25.81 (-)
4/1/92 19.42 3.25 6.48% 7.43% 26.57 (-)
5/1/92 19.33 3.31 6.40% 7.44% 26.69 (-)
6/1/92 19.25 3.35 6.37% 7.55% 26.30 (-)
7/1/92 19.17 3.42 6.28% 7.37% 27.36 (-)
8/3/92 19.08 3.45 6.26% 7.52% 26.79 (-)
9/1/92 19.00 3.49 6.22% 7.49% 27.11 (-)
10/1/92 18.92 3.45 6.32% 7.50% 27.20 (-)
11/2/92 18.83 3.45 6.35% 7.35% 28.12 (-)
12/1/92 18.75 3.50 6.29% 7.27% 28.66 (-)
1/4/93 18.66 3.56 6.23% 7.30% 28.69 (-)
2/1/93 18.58 3.63 6.14% 7.25% 29.08 (-)
3/1/93 18.50 3.65 6.14% 7.17% 29.69 (-)
4/1/93 18.42 3.68 6.12% 7.34% 28.97 (-)
5/3/93 18.33 3.68 6.15% 7.23% 29.74 (-)
6/1/93 18.25 3.75 6.07% 7.24% 29.82 (-)
7/1/93 18.17 3.77 6.07% 7.30% 29.69 (-)
8/2/93 18.08 3.83 6.00% 7.12% 30.82 (-)
9/1/93 18.00 3.85 6.00% 7.20% 30.57 (-)
10/1/93 17.92 3.86 6.01% 7.11% 31.21 (-)
11/1/93 17.83 3.82 6.10% 7.20% 30.90 (-)
12/1/93 17.75 3.84 6.10% 7.17% 31.28 (-)
1/3/94 17.66 3.90 6.04% 7.00% 32.33 (-)
2/1/94 17.58 3.82 6.19% 7.20% 31.46 (-)
3/1/94 17.50 3.74 6.35% 7.51% 30.08 (-)
4/4/94 17.41 3.71 6.44% 7.47% 30.46 (-)
5/2/94 17.33 3.71 6.47% 7.41% 30.95 (-)
6/1/94 17.25 3.70 6.51% 7.60% 30.20 (-)
7/1/94 17.17 3.77 6.43% 7.44% 31.18 (-)
8/1/94 17.09 3.78 6.45% 7.22% 32.46 (-)
9/1/94 17.00 3.72 6.58% 7.42% 31.66 (-)
10/3/94 16.91 3.72 6.61% 7.32% 32.37 (-)
11/1/94 16.83 3.71 6.66% 7.59% 31.19 (-)
12/1/94 16.75 3.74 6.65% 7.54% 31.64 (-)
1/3/95 16.66 3.81 6.57% 7.41% 32.46 (-)
2/1/95 16.58 3.90 6.45% 7.20% 33.72 (-)
3/1/95 16.50 3.92 6.45% 7.05% 34.72 (-)
4/3/95 16.41 3.97 6.40% 6.90% 35.74 (-)
5/1/95 16.34 4.13 6.17% 6.68% 37.15 (-)
6/1/95 16.25 4.16 6.16% 6.57% 38.01 (-)
7/3/95 16.16 4.15 6.21% 6.39% 39.26 (-)
8/1/95 16.09 4.20 6.16% 6.40% 39.37 (-)
9/1/95 16.00 4.24 6.13% 6.16% 41.03 Scratched
10/2/95 15.92 4.30 6.07% 6.22% 40.88 (-)
11/1/95 15.83 4.36 6.01% 5.97% 42.67 Scratched
12/1/95 15.75 4.43 5.94% 5.87% 43.49 Scratched
1/2/96 15.66 4.45 5.94% 5.68% 44.97 ++
2/1/96 15.58 4.38 6.08% 5.65% 45.38 ++
3/1/96 15.50 4.34 6.18% 5.61% 45.83 ++
4/1/96 15.42 4.32 6.24% 5.55% 46.49 ++
5/1/96 15.33 4.31 6.29% 5.40% 47.68 ++
6/3/96 15.24 4.37 6.24% 5.41% 47.86 ++
7/1/96 15.17 4.38 6.25% 5.75% 45.74 ++
8/1/96 15.08 4.37 6.31% 5.64% 46.70 ++
9/3/96 14.99 4.45 6.22% 5.29% 49.32 ++
10/1/96 14.92 4.54 6.11% 5.13% 50.68 ++
11/1/96 14.83 4.62 6.02% 4.64% 54.51 ++
12/2/96 14.75 4.59 6.10% 4.81% 53.44 ++
1/2/97 14.66 4.60 6.12% 4.41% 56.77 ++
2/3/97 14.58 4.60 6.16% 4.38% 57.22 ++
3/3/97 14.50 4.56 6.25% 4.71% 54.85 ++
4/1/97 14.42 4.63 6.18% 4.31% 58.12 ++
5/1/97 14.34 4.67 6.15% 3.91% 61.66 ++
6/2/97 14.25 4.72 6.11% 3.62% 64.40 ++
7/1/97 14.17 4.85 5.94% 3.08% 69.53 ++
8/1/97 14.09 4.81 6.04% 3.52% 65.63 ++
9/2/97 14.00 4.88 5.97% 3.15% 69.22 ++
10/1/97 13.92 4.95 5.90% 3.42% 66.90 ++
11/3/97 13.83 4.97 5.91% 3.11% 69.98 ++
12/1/97 13.75 5.02 5.86% 3.00% 71.17 ++
1/2/98 13.66 5.09 5.80% 2.94% 71.96 ++
2/2/98 13.58 5.08 5.85% 2.43% 77.14 ++
3/2/98 13.50 5.10 5.85% 2.07% 81.07 ++
4/1/98 13.42 5.12 5.86% 2.00% 81.89 ++
5/1/98 13.34 5.18 5.80% 2.15% 80.46 ++
6/1/98 13.25 5.22 5.78% 1.86% 83.74 ++
7/1/98 13.17 5.23 5.80% 1.95% 82.85 ++
8/3/98 13.08 5.33 5.69% 3.19% 70.86 ++
9/1/98 13.00 5.44 5.56% 2.72% 75.41 ++
10/1/98 12.92 5.41 5.64% 2.11% 81.56 ++
11/2/98 12.83 5.43 5.65% 1.66% 86.51 ++
12/1/98 12.75 5.45 5.65% 1.22% 91.54 ++
1/4/99 12.66 5.50 5.62% 0.90% 95.38 ++
2/1/99 12.58 5.40 5.81% 1.16% 92.40 ++
3/1/99 12.50 5.43 5.80% 0.85% 96.09 ++
4/1/99 12.42 5.45 5.81% 0.55% 99.80 ++
5/3/99 12.33 5.40 5.93% 0.75% 97.41 ++
6/1/99 12.25 5.38 6.00% 0.31% 102.82 ++
7/1/99 12.17 5.36 6.08% 0.58% 99.60 ++
8/2/99 12.08 5.35 6.14% 0.62% 99.11 ++
9/1/99 12.00 5.42 6.07% 0.86% 96.39 ++
10/1/99 11.92 5.44 6.08% 0.35% 102.49 ++
11/1/99 11.83 5.44 6.12% 0.18% 104.57 ++
12/1/99 11.75 5.41 6.22% -0.31% 110.83 ++
1/3/00 11.66 5.41 6.27% 0.13% 105.25 ++
2/1/00 11.58 5.47 6.21% 0.30% 103.25 ++
3/1/00 11.50 5.55 6.12% -0.51% 113.32 ++
4/3/00 11.41 5.52 6.22% -0.25% 109.92 ++
5/1/00 11.33 5.51 6.28% -0.07% 107.68 ++
6/1/00 11.25 5.63 6.13% -0.29% 110.35 ++
7/3/00 11.16 5.68 6.09% -0.15% 108.71 ++
8/1/00 11.08 5.76 6.00% -0.70% 115.44 ++
9/1/00 11.00 5.80 5.98% -0.21% 109.33 ++
10/2/00 10.91 5.84 5.96% -0.17% 108.86 ++
11/1/00 10.83 5.93 5.86% 0.59% 100.28 ++
12/1/00 10.75 6.03 5.74% 0.54% 100.80 ++
1/2/01 10.66 6.14 5.61% 0.22% 104.37 ++
2/1/01 10.58 6.20 5.56% 1.13% 94.83 ++
3/1/01 10.50 6.23 5.55% 1.78% 88.80 ++
4/2/01 10.42 6.20 5.65% 1.06% 95.70 ++
5/1/01 10.34 6.25 5.61% 1.01% 96.32 ++
6/1/01 10.25 6.28 5.61% 1.26% 93.97 ++
7/2/01 10.17 6.42 5.43% 1.37% 93.03 ++
8/1/01 10.09 6.49 5.36% 2.04% 87.19 ++
9/4/01 9.99 6.55 5.32% 2.92% 80.13 ++
10/1/01 9.92 6.67 5.16% 2.75% 81.65 ++
11/1/01 9.83 6.58 5.35% 2.01% 87.90 ++
12/3/01 9.75 6.54 5.47% 1.93% 88.67 ++
1/2/02 9.66 6.59 5.44% 2.11% 87.36 ++
2/1/02 9.58 6.65 5.38% 2.33% 85.67 ++
3/1/02 9.50 6.55 5.60% 1.96% 88.88 ++
4/1/02 9.42 6.66 5.46% 2.65% 83.48 ++
5/1/02 9.34 6.72 5.41% 2.76% 82.85 ++
6/3/02 9.25 6.74 5.43% 3.62% 76.93 ++
7/1/02 9.17 6.77 5.43% 4.56% 70.99 ++
8/1/02 9.09 6.88 5.29% 4.53% 71.46 ++
9/3/02 9.00 6.99 5.16% 5.92% 63.68 (-)
10/1/02 8.92 6.95 5.27% 4.98% 69.27 ++
11/1/02 8.83 6.93 5.36% 4.32% 73.53 ++
12/2/02 8.75 7.09 5.14% 5.12% 69.01 Scratched
1/2/03 8.66 7.10 5.17% 5.50% 67.20 (-)
2/3/03 8.58 7.19 5.07% 5.75% 66.18 (-)
3/3/03 8.50 7.19 5.12% 5.68% 66.81 (-)
4/1/03 8.42 7.25 5.06% 4.74% 72.33 ++
5/1/03 8.34 7.38 4.89% 4.15% 76.13 ++
6/2/03 8.25 7.37 4.96% 4.04% 77.09 ++
7/1/03 8.17 7.12 5.46% 3.86% 78.44 ++
8/1/03 8.09 7.17 5.42% 3.65% 79.95 ++
9/2/03 8.00 7.36 5.14% 3.83% 79.09 ++
10/1/03 7.92 7.29 5.32% 3.15% 83.56 ++
11/3/03 7.83 7.31 5.35% 3.08% 84.28 ++
12/1/03 7.75 7.38 5.27% 2.43% 88.68 ++
1/2/04 7.66 7.44 5.22% 2.22% 90.29 ++
2/2/04 7.58 7.52 5.13% 2.06% 91.54 ++
3/1/04 7.50 7.58 5.08% 2.29% 90.15 ++
4/1/04 7.42 7.38 5.52% 2.54% 88.73 ++
5/3/04 7.33 7.35 5.64% 2.38% 89.93 ++
6/1/04 7.25 7.39 5.63% 2.14% 91.67 ++
7/1/04 7.17 7.46 5.55% 2.64% 88.63 ++
8/2/04 7.08 7.61 5.33% 2.62% 88.97 ++
9/1/04 7.00 7.62 5.37% 2.50% 89.92 ++
10/1/04 6.92 7.68 5.32% 2.30% 91.28 ++
11/1/04 6.83 7.62 5.51% 1.74% 94.98 ++
12/1/04 6.75 7.69 5.43% 1.26% 98.20 ++
1/3/05 6.66 7.74 5.40% 1.65% 95.79 ++
2/1/05 6.58 7.69 5.58% 1.35% 97.80 ++
3/1/05 6.50 7.66 5.71% 1.65% 96.08 ++
4/1/05 6.42 7.76 5.57% 1.98% 94.24 ++
5/2/05 6.33 7.84 5.48% 1.50% 97.22 ++
6/1/05 6.25 7.89 5.44% 1.50% 97.34 ++
7/1/05 6.17 7.81 5.69% 0.92% 100.95 ++
8/1/05 6.09 7.91 5.55% 1.09% 100.03 ++
9/1/05 6.00 7.83 5.81% 0.97% 100.82 ++
10/3/05 5.91 7.76 6.06% 1.28% 99.13 ++
11/1/05 5.83 7.80 6.05% 0.65% 102.86 ++
12/1/05 5.75 7.88 5.95% 0.66% 102.89 ++
1/3/06 5.66 7.87 6.08% 0.21% 105.61 ++
2/1/06 5.58 7.90 6.09% 0.16% 105.88 ++
3/1/06 5.50 7.82 6.38% -0.06% 107.19 ++
4/3/06 5.41 7.81 6.51% -0.30% 108.62 ++
5/1/06 5.34 7.80 6.63% 0.24% 105.47 ++
6/1/06 5.25 7.81 6.72% 0.22% 105.61 ++
7/3/06 5.16 7.91 6.57% 0.11% 106.25 ++
8/1/06 5.09 8.04 6.34% -0.35% 108.76 ++
9/1/06 5.00 8.11 6.27% -0.86% 111.55 ++
10/2/06 4.92 8.17 6.22% -1.51% 115.17 ++
11/1/06 4.83 8.26 6.09% -1.92% 117.34 ++
12/1/06 4.75 8.22 6.30% -2.24% 118.98 ++
1/3/07 4.66 8.21 6.46% -2.59% 120.76 ++
2/1/07 4.58 8.34 6.21% -2.21% 118.38 ++
3/1/07 4.50 8.34 6.32% -2.49% 119.70 ++
4/2/07 4.42 8.38 6.33% -3.49% 124.99 ++
5/1/07 4.34 8.32 6.63% -4.31% 129.33 ++
6/1/07 4.25 8.28 6.88% -4.01% 127.17 ++
7/2/07 4.17 8.35 6.81% -3.36% 123.23 ++
8/1/07 4.09 8.46 6.61% -3.78% 125.08 ++
9/4/07 3.99 8.53 6.55% -4.75% 129.74 ++
10/1/07 3.92 8.61 6.43% -5.21% 131.79 ++
11/1/07 3.83 8.76 6.09% -4.26% 126.27 ++
12/3/07 3.75 8.79 6.14% -4.18% 125.40 ++
1/2/08 3.66 8.95 5.77% -2.64% 117.86 ++
2/1/08 3.58 8.96 5.87% -1.80% 114.02 ++
3/3/08 3.50 8.98 5.95% -1.72% 113.52 ++
4/1/08 3.42 8.95 6.19% -3.11% 119.04 ++
5/1/08 3.33 8.89 6.57% -3.56% 120.56 ++
6/2/08 3.25 8.89 6.75% -1.00% 110.38 ++
7/1/08 3.17 8.89 6.92% -0.76% 109.46 ++
8/1/08 3.08 8.95 6.89% -1.24% 111.04 ++
9/2/08 3.00 8.85 7.50% 1.84% 101.16 ++
10/1/08 2.92 8.63 8.64% 8.53% 84.17 Scratched
11/3/08 2.83 8.94 7.58% 11.71% 78.14 (-)
12/1/08 2.75 9.24 6.51% 11.63% 78.97 (-)
1/2/09 2.66 9.17 7.04% 15.78% 72.33 (-)
2/2/09 2.58 9.13 7.46% 21.54% 64.62 (-)
3/2/09 2.50 9.27 7.04% 18.23% 70.29 (-)
4/1/09 2.42 9.30 7.15% 14.50% 77.01 (-)
5/1/09 2.34 9.38 7.01% 12.38% 81.34 (-)
6/1/09 2.25 9.43 7.03% 12.77% 81.52 (-)
7/1/09 2.17 9.57 6.58% 9.53% 87.70 (-)
8/3/09 2.08 9.66 6.40% 8.11% 90.85 (-)
9/1/09 2.00 9.78 6.01% 6.48% 94.24 (-)
10/1/09 1.92 9.82 6.05% 7.82% 92.48 (-)
11/2/09 1.83 9.95 5.58% 4.83% 98.01 ++
12/1/09 1.75 9.79 6.83% 3.90% 99.92 ++
1/4/10 1.66 9.94 6.25% 6.46% 96.32 (-)
2/1/10 1.58 9.96 6.42% 4.75% 99.29 ++
3/1/10 1.50 9.95 6.83% 1.00% 105.27 ++
4/1/10 1.42 10.05 6.50% -0.05% 106.93 ++
5/3/10 1.33 10.13 6.31% 6.40% 98.38 Scratched
6/1/10 1.25 10.30 5.32% 11.52% 93.21 (-)
7/1/10 1.17 10.39 4.92% 6.07% 99.73 (-)
8/2/10 1.08 10.55 3.85% 11.24% 95.22 (-)
9/1/10 1.00 10.55 4.17% 3.04% 103.70 ++
10/1/10 0.92 10.59 4.12% -0.79% 107.63 ++
11/1/10 0.83 10.53 5.27% -0.87% 107.63 ++
12/1/10 0.75 10.40 7.63% -9.13% 114.81 ++
1/3/11 0.66 10.41 8.56% -13.42% 117.52 ++
2/1/11 0.58 10.43 9.42% -19.88% 121.53 ++
3/1/11 0.50 10.40 11.57% -22.59% 121.57 ++
4/1/11 0.42 10.54 10.49% -31.42% 125.15 ++
5/2/11 0.33 10.68 8.94% -35.51% 123.72 ++
6/1/11 0.25 10.63 14.13% -40.23% 121.65 ++
7/1/11 0.17 10.80 10.81% -47.37% 119.16 ++
8/1/11 0.08 10.96 3.27% -46.45% 112.67 ++
9/1/11 0.00 10.99 106.85



CONCLUSION: Beginning in the the Fall of 1995, but no later than Spring of 1996 (and exactly when stock prices were soaring), money should have been rotated from stocks and into bonds and except for some brief, traderly exceptions, the bulk --if not all-- of it should have been kept in bonds if one's intention were the conservative goal of capital-preservation.

Charlie
-------------------

"I love it when a plan comes together."
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.