It's commonly stated that stocks provide superior long-term returns to bonds.
But what does "long-term" mean in this context?
Over the last 20 years, the S&P500 has produced an annualised 4% return, with all dividends reinvested. That's an annualised real (after-inflation) return of less than 2%.
However, over the same time period long-term (20 year) US Treasuries provided an annualised 7.4% return.
Is this unprecedented?
Nope.
For the 30-year period to 30 September 2011, the S&P500 returned an annualised 10.8%, compared to an annualised return of 11.5% on long-term Treasury bonds.
In fact, for the 40-year period to 31 December 2008, the annualised return on the S&P500 was essentially the same as the return on 20-year US Treasuries (8.98% v 8.92%).
But what does "long-term" mean in this context?
Over the last 20 years, the S&P500 has produced an annualised 4% return, with all dividends reinvested. That's an annualised real (after-inflation) return of less than 2%.
However, over the same time period long-term (20 year) US Treasuries provided an annualised 7.4% return.
Is this unprecedented?
Nope.
For the 30-year period to 30 September 2011, the S&P500 returned an annualised 10.8%, compared to an annualised return of 11.5% on long-term Treasury bonds.
In fact, for the 40-year period to 31 December 2008, the annualised return on the S&P500 was essentially the same as the return on 20-year US Treasuries (8.98% v 8.92%).