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>>From 1989-2005 an 80/20 portfolio of DFA funds returned 11.9% annually<<

This is a case where the legal rider "past performance is not a guarantee of future returns" or however they word things is really key.

Interest rates have fallen *dramatically* in the last 17 years. A huge portion of the returns you are referring to are due to that decrease. Since they cannot do the same thing over the next 17 years, it is pretty much a lock that bond funds will not have similar returns going forward.


The post responded to reflected that time frame.

>>Also, adding high yield bond funds in a tax deferred account makes a ton of sense.<<

On the Bonds and Fixed Income Investments board (, it is generally agreed that bond mutual funds are a bad idea...especially in a low interest rate environment like we currently have. Basically, you should be able to beat the Lehman index by putting money into CDs...and your risk will actually be lower in the CDs...



Well if it was posted on an internet message board it must be the Gospel. <grin>

Over the long term diversifying a bond portfolio-high yield, US. Short term bonds, US intermediate term bonds, TIPS, and international bonds-will outperform CDs. Actually we have had a RISING interest rate environment which means bond funds don't do as well

CDs are less volatile than bond funds but CDs also are more suseptible to inflation risk.

We use both, fwiw.

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