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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.

Wednesday, July 26, 2006

1926-2000: Volatility of Returns for Stocks and Bonds

As you can imagine stocks and bonds have had varying return from 1926-2000. Historically, the stock market was very volatile until after the Great Depression and more legislation was passed to protect investors. Since World War II, the stock market has displayed much less volatility because of the economic turn around and regulations.

Bonds have behaved the opposite as the stock market; it has had less volatility in much earlier periods and from 1980-2000 it has experienced a significant raise in volatility. Stocks are still much more volatile than bonds and always will be, however, with that risk has come much better historical performance. So if you mix these two asset classes it proves to be an excellent way to diversify your portfolio.

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