Volatility: The First Rule of Investing
October 31, 2011
Remember these words: past performance is no guarantee of future performance. Bonds outperforming stocks over a 30 year period for the first time since 1861 is a testament to this fact. For years investors assumed stocks always beat bonds over long periods of time. While this event is likely anomalous, it highlights an important investment truth: almost anything can happen.
The biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War. Fixed-income investments advanced 6.25 percent this year, almost triple the 2.18 percent rise in the Standard & Poor’s 500 Index through last week, according to Bank of America Merrill Lynch indexes. Debt markets are on track to return 7.63 percent this year, the most since 2002, the data show. Long-term government bonds have gained 11.5 percent a year on average over the past three decades, beating the 10.8 percent increase in the S&P 500, said Jim Bianco, president of Bianco Research in Chicago.
Read the entire article on Bloomberg News.
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