Atgard: leaving aside for a moment that I'm not convinced that history is such a strong guarantee, as opposed to the dates and amounts printed on a bond -- like I said, I don't want to be one of the victims of a historical first -- the other thing is, it's not just about the 30 year goalpoast. In the interim, that long bond is likely to be there for me if I need it and my stocks are in the dumpster. Replacing it with a stock just won't do the same, period. If 10 years from now if we're in a deep crash and I need money to live the notion that I only need to wait another 20 years, and historically ... etc, won't do anything for me or pay my bills. When the stock market went not to zero but close, 11% of its former value, the Treasury was king of the hill.Atgard wrote:Like I said, I think the risk that stocks have negative real return over a 30-year period (which is theoretically possible, but has never happened) is less than the risk that 30-year bonds with historically low rates will have negative real return over that period.
I know either, or both, or neither could happen. And, if the stock market "goes to zero," as in the article you linked, you think those treasuries will be worth anything (they may be "paid" in thoroughly-deflated dollars)? If everything collapses, everything collapses. (That's another thread, which involves guns and gold.) Like I said, I plan for the reasonably probable. If I tried to plan for every possible "six sigma" event and let that outweigh the probable outcomes, I wouldn't invest in stocks or bonds and would miss out on everything while worrying about very unlikely scenarios.
In a balanced portfolio, the long bond may variously be slightly better or slightly worse than shorter fixed income in terms of overall efficiency, but far from a slam dunk either way.
Again, what you just said is the truly pernicious problem with the bond scare talk. A poster comes here, hears that they you shouldn't use bonds (or bond funds! a perrenial favorite), they should stick to bank accounts, and upon realizing that they can't use any with the bulk of their money they are told or conclude that oh well, they should just use stocks then, bonds are too scary, the conventional wisdom turned on its head because of one or two percentage points (nevermind that stock themselves are priced to return much less than at other times). If we convince someone who belongs at a 50 or 60% allocation to go to 100%, we've done them a great disservice and put them in danger of massive losses. And we're guilty of thinking, and spreading the notion, that an investor should just look in the market at this or that percentage and change their allocation accordingly because the market is obviously nuts. This is entirely not what we should be doing.