More on Stocks Against Bonds

Here’s another look at the epic battle of stocks against bonds. As a proxy for the long-term bond markets, I used Vanguard’s Long-Term Investment-Grade Index Fund (VWESX) and for stocks, I used Vanguard’s 500 Index (VFINX). It’s not perfect but it’s good enough to make my point.

The graph below shows VFINX divided by VWESX so whenever the line is rising, stocks are outperforming bonds.

As you can see, bonds have held their own for a long time which runs counter to established wisdom that there’s a “premium” in holding equities. I still think there is an equity premium but it’s much smaller than most folks realize. Furthermore, the premium is very volatile so it’s not unusual to experience long phases where bonds beat stocks.

Despite how well the stock market has done since the March 2009 low, it’s dead even with corporate bonds since May 8, 2009.

Since July 13, 2007, corporate bonds have gained 46.74% while stocks have lost 9.38%.

Posted by on October 31st, 2011 at 1:45 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.