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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Sunday, June 25, 2006

Historical Bond Performance 1925-2000

From 1925-2000 bonds did not lead all asset classes in performance returns, but it did show stable returns over that long-term period. Over that period stocks well-outperformed any type of bonds or Treasury bills, but of course there is much more risk in stocks. In this period corporate bonds outstripped government bonds and Treasury bills, but those corporate bonds possessed much more risk (default) than the latter. Municipal bonds were outperfromed by other bonds, but they provide a tax advantage of not having to pay federal income tax on them and sometimes state and local taxes as well. Bonds do not provide the long-term growth that stocks do, though during tougher economic times they do tend to outperform stocks. Because of these characteristics bonds are a source of diversification to your overall investment portfolio.

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