I recently received the latest Ibbotson Yearbook in the mail the other day. If you’re not familiar with it, the book is a great source for long-term returns of different asset classes (click here for more info).
What I find interesting is that the spread between the returns of stocks and bonds really isn’t that much. I think it would surprise many investors that boring bonds have held their own. Over the last 40 years, stocks have beaten bonds by a final score 10.5% to 8.4%.
The difference is theoretically due to greater risk for stocks. (Note: This is different from the usual equity risk premium which looks at stocks versus T-bills. Here I’m looking at stocks and long-term corporate bonds.)
Here’s a chart I made of stocks and long-term corporate bonds. The only difference is that I stretched out the bond returns by 2% a year.
