Bonds Beat Stocks Over the Last 20 Years

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seatac
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Bonds Beat Stocks Over the Last 20 Years

Post by seatac »

From New York times

Over the long run, stocks are supposed to beat bonds. But they haven’t managed to do that uniformly since 2000, a sign of how difficult things have gotten for ordinary investors.

https://www.nytimes.com/2020/05/01/busi ... d=em-share
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Call_Me_Op »

Cherry-picking time periods can yield all sorts of results.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by willthrill81 »

There can be a very big gap between theory and reality.

In theory, gold should not have a return above inflation. Yet it too has robustly beaten stocks and long-term Treasuries since 2000.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Dantes »

It may not be done well; but you are surprised to find it done at all.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by rockstar »

How negative do you expect yields to go? Right now, the ten year offers less than a point. I don’t see how this bond can go negative enough to beat the S&P over the next 20 years. Right now, I expect the market to return to me about 6% per year over the next decade and maybe lower with COVID-19. I can’t see bonds as anything more than cash equivalents unless you start buying junk.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by muddlehead »

So, S&P 500 return since 2000 to last week 5.4% annualized. Anyone have the previous 20 years 1980 - 2000?
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by dziuniek »

So bonds had their 20 years, is it time to lever up on stocks? :twisted: :twisted: :twisted:
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by J295 »

Call_Me_Op wrote: Tue May 05, 2020 5:04 pm Cherry-picking time periods can yield all sorts of results.
Yep
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by willthrill81 »

dziuniek wrote: Tue May 05, 2020 6:22 pm So bonds had their 20 years, is it time to lever up on stocks? :twisted: :twisted: :twisted:
NTSX? PSLDX? Or if you're really feeling adventurous, UPRO? :mrgreen:
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by nisiprius »

This wouldn't be surprising, if it hadn't been for a too-vocal coterie of people making too-simplistic statements too often.

For example, in the 4th edition of Stocks for the Long Run, Siegel made a carefully qualified, accurate statement:
never in any of the past 175 years would a buyer of newly-issued 30-year bonds have outperformed an investor in a diversified portfolio of common stocks held over the same period.
"The past 175 years" is noteworthy, because when he talks about stock performance in isolation he uses data going back to 1802; but in this case he only goes back to 1861.

This statement often gets simplified to "stocks always have beaten bonds over periods of 30 years," and then to "stocks always beat bonds." In the 5th edition, Siegel changed this statement:
In the first four editions of Stocks for the Long Run, I noted that the last 30-year period when the return on long-term bonds beat stocks ended in 1861, at the onset of the Civil War. That is no longer true. Because of the large drop in government bond yields over the past decade, the 11.03 percent annual returns on long-term government bonds surpassed the 10.98 percent on stocks for the 30-year period from January 1, 1982, through the end of 2011.
And yet one continues to see statements, repeated over and over, that stocks have always beaten bonds over any period of 30 years.

Glassman and Hassett's 1999 book, Dow 36,000 wasn't just a case of ludicrous overoptimism. Nor was it a case of "they weren't wrong, just early," because they were quite specific:
A sensible target date for Dow 36,000 is early 2005, but it could be reached much earlier.
What is important is their reason for making that prediction:
The truth is that, over the long-term, stocks are no more risky than bonds or Treasury bills.... investors in recent years have begun to act more rationally, bidding up the prices of stocks and driving down the premium they had demanded when they believed stocks were risky.... Soon, prices will rise to where they will be “perfectly reasonable”—around 36,000 on the Dow Jones industrial average.
They say, flatly
The Dow 36,000 theory depends on the risk premium for stocks disappearing.
The fact that the Dow Jones Industrial Average did not reach 36,000 by early 2005 proves that the market continues to be risky, even in the long term. And the risk premium has not disappeared.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by kabob »

Sounds Wacko!
A 20Yr, $1000 5% Bond will yield $50per yr for 20Yys - then return the original $1000 the the holder.
$50 * 20Yr = $1000 total interest paid - usually considered the Total Return - That is !00% return in 20 years
But...
Image
It IS true! In Spring early 2000 SPY was around $150 - now, Spring 2020 we're less than $300, and less than 100% Return...
Didn't believe it till I checked myself - Big WOW on that.

Loss Avoidance is Soooo Important when holding Stocks. Buy and Hope & Stay the Horrors "Can" ruin your day, life and future!
Below my chosen set of favorite indicators, I choose to Take the Profit and Run and Hide in Bonds...(rationally)
My mentor was smarter than I, he always told me take my profits from stocks and buy good discounted bonds. He was Smart! - Did Well in the market. I need to keep my bond allocation higher...
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by TheDDC »

Don’t think so. But it’s worth investing in funds that beat the S&P, which last I checked we do. Otherwise why invest, eh? But I haven’t been investing since 2000 anyway, so what do I care about the/your past? Bond rates are not likely to go higher.

I just shredded some nifty bank ads that my mom had from the 1980s touting 14% interest on a CD. You may want to find your way back to the time machine.

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Re: Bonds Beat Stocks Over the Last 20 Years

Post by timboktoo »

Asset allocation, baby.

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Re: Bonds Beat Stocks Over the Last 20 Years

Post by illumination »

Maybe someone brighter than me can do the math and calculate how much below zero negative interest rates would need to go to give the same rate of return for the next 20 years as the last 20 years.

Maybe something like -6% for a 10 year Treasury?

"Nobody knows nothing", but I don't see it happening and I think an investor should only count on the promised interest rate a bond delivers and nothing more.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by willthrill81 »

TheDDC wrote: Tue May 05, 2020 8:35 pm Don’t think so.
Long-term Treasuries did. TBM did not.

I find it disingenuous that most authors who cite periods where 'bonds beat stocks' never specify which bonds they are referring to. There's a potentially huge difference between long-term Treasuries, commercial paper, T-bills, investment-grade corporates, municipals, ex-U.S. sovereign bonds, junk bonds, etc.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by TheDDC »

willthrill81 wrote: Tue May 05, 2020 10:15 pm
TheDDC wrote: Tue May 05, 2020 8:35 pm Don’t think so.
Long-term Treasuries did. TBM did not.

I find it disingenuous that most authors who cite periods where 'bonds beat stocks' never specify which bonds they are referring to. There's a potentially huge difference between long-term Treasuries, commercial paper, T-bills, investment-grade corporates, municipals, ex-U.S. sovereign bonds, junk bonds, etc.
Sure. If you really want to “dip your wick” in the fixed/bond ink then I would not pick TBM, either. I would go active managed (Wellington, Wellesley) and pick a fund manager who knows what the heck they’re doing when it comes to fixed income allocation. T-bill, t-note, munis versus junk bond, etc.

“Taking risk off the table” and moving to fixed income is a loser for long term investors, but the avenue is certainly there and more relevant for short term investors (such as 529s which I will be doing soon) which the OP does not even address in his nondescript post.

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Re: Bonds Beat Stocks Over the Last 20 Years

Post by IndexCore »

treasury.gov only displays treasuries going back to 1990, at which point 10 yr and 30 yr yielded about 8%. When you hold a bond yielding 8% for decades, your odds of beating stocks are much higher.

But now? Currently 20 year treasuries yield 1.07% per year.
https://www.treasury.gov/resource-cente ... data=yield
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by dziuniek »

willthrill81 wrote: Tue May 05, 2020 7:46 pm
dziuniek wrote: Tue May 05, 2020 6:22 pm So bonds had their 20 years, is it time to lever up on stocks? :twisted: :twisted: :twisted:
NTSX? PSLDX? Or if you're really feeling adventurous, UPRO? :mrgreen:
That's weak sauce!

TQQ, TNA
DZK, YINN
TMF, UGLD

8-) haha
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Post by grayfox »

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Re: Bonds Beat Stocks Over the Last 20 Years

Post by 3funder »

This would only have been relevant to an investor if he/she invested all of his/her money at the market high and did not invest any more money in the following 20 years. Dollar cost averaging into the market would have yielded a far superior total return to that of bonds. Just saying...
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by DonIce »

nisiprius wrote: Tue May 05, 2020 8:03 pm This statement often gets simplified to "stocks always have beaten bonds over periods of 30 years," and then to "stocks always beat bonds." In the 5th edition, Siegel changed this statement:
In the first four editions of Stocks for the Long Run, I noted that the last 30-year period when the return on long-term bonds beat stocks ended in 1861, at the onset of the Civil War. That is no longer true. Because of the large drop in government bond yields over the past decade, the 11.03 percent annual returns on long-term government bonds surpassed the 10.98 percent on stocks for the 30-year period from January 1, 1982, through the end of 2011.
And yet one continues to see statements, repeated over and over, that stocks have always beaten bonds over any period of 30 years.
To be fair, one has to be careful by what one means by "stocks" and "bonds". It should not be generally assumed that "bonds" = 100% LTT. If one can pick the type of bond that did best over the last 30 years, one should then at least compare it to the type of stock that did best over the last 30 years...

TBM has not come close to beating TSM over the last 30 years.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by garlandwhizzer »

IMO starting at where we are now with equity valuations and bond yields, the chance that LTT will beat diversified US stocks over the next 30 years is very close to zero. The last 30 years has been the greatest US bond bull market in history, largely driven by two things: ever lower inflation rates and ever lower interest rates. LTT is the class of of bonds that maximally benefited in those circumstances. In general, I do not believe that backtesting is a reliable guide to the market's future. I also believe many investors put too much faith in it. People are drawn to backtesting because it is simple to do and past history gives the illusion of certainty.

This is especially so when trying to project bond returns into the future based on the last 30 years action. Market parameters in terms of inflation rates, interest rates, economic growth, and labor productivity growth are totally different now than they were over the past 30 years. The risk then was inflation: the risk now is deflation. The economy was then showing robust growth with the risk of overheating; now it stagnant and we're going into a recession. 30 year Treasuries yielded 9% in 1990: now they yield 1.31%, less than the last 12 months inflation rate, negative real yield. It is economic parameters that drive market returns, not backtesting arithmetic, especially in the bond market.

There is a wide dispersion of potential 30 year US stock returns but certainly the mean value is much greater than 1.31% nominal which is what your guaranteed annual return will be if you hold a 30 year Treasury today to maturity. That's a long, long way from the 9% yield you got every year and could spend or re-invest every year if you held the 1990 30 yr. Treasury. It's a totally different world now. IMO if you rely on backtesting in the bond market to divine the future of returns, you're in trouble. Less so with equity.

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garland whizzer

Post by KEotSK66 »

hi

why less so for equities ?
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by midareff »

J295 wrote: Tue May 05, 2020 6:56 pm
Call_Me_Op wrote: Tue May 05, 2020 5:04 pm Cherry-picking time periods can yield all sorts of results.
Yep
double Yep!!
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by tvubpwcisla »

For me, I enjoy owning shares in a company more than owning the debt of a company. I will stick with stocks for building long term generational wealth. I think you can pick any time period you want and say anything beats stocks. For example, there was a period when CD's beat stocks or even an online savings account. I know long term investments in the great companies of the world will provide superior results!

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Re: Bonds Beat Stocks Over the Last 20 Years

Post by midareff »

garlandwhizzer wrote: Thu May 07, 2020 4:11 pm IMO starting at where we are now with equity valuations and bond yields, the chance that LTT will beat diversified US stocks over the next 30 years is very close to zero. The last 30 years has been the greatest US bond bull market in history, largely driven by two things: ever lower inflation rates and ever lower interest rates. LTT is the class of of bonds that maximally benefited in those circumstances. In general, I do not believe that backtesting is a reliable guide to the market's future. I also believe many investors put too much faith in it. People are drawn to backtesting because it is simple to do and past history gives the illusion of certainty.

This is especially so when trying to project bond returns into the future based on the last 30 years action. Market parameters in terms of inflation rates, interest rates, economic growth, and labor productivity growth are totally different now than they were over the past 30 years. The risk then was inflation: the risk now is deflation. The economy was then showing robust growth with the risk of overheating; now it stagnant and we're going into a recession. 30 year Treasuries yielded 9% in 1990: now they yield 1.31%, less than the last 12 months inflation rate, negative real yield. It is economic parameters that drive market returns, not backtesting arithmetic, especially in the bond market.

There is a wide dispersion of potential 30 year US stock returns but certainly the mean value is much greater than 1.31% nominal which is what your guaranteed annual return will be if you hold a 30 year Treasury today to maturity. That's a long, long way from the 9% yield you got every year and could spend or re-invest every year if you held the 1990 30 yr. Treasury. It's a totally different world now. IMO if you rely on backtesting in the bond market to divine the future of returns, you're in trouble. Less so with equity.

Garland Whizzer
Excellent points Garland..... I'd add that when Bengen did his WR Study Based on Historical Data http://www.retailinvestor.org/pdf/Bengen1.pdf he used ... I'll pull a highlight ... To begin with, let's see how our hypo-theoretical planner got into trouble. By referring to the Ibbotson data (which we will assume had not changed significantly by 2004), our planner learned that common stocks had returned 10.3 percent compounded over the years, and intermediate-term Treasuries had re- turned 5.1 percent. Inflation averaged 3. Geez, can you make 4% work with 10.3% and 5.1% against inflation of 3%.... I guess so. 2.1% real on IT Treasuries vs. negative 1.3% on ten year treasuries now. It is a different investment world and ignoring that may cost you dearly when you can least do anything about it.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by whereskyle »

3funder wrote: Wed May 06, 2020 9:44 am This would only have been relevant to an investor if he/she invested all of his/her money at the market high and did not invest any more money in the following 20 years. Dollar cost averaging into the market would have yielded a far superior total return to that of bonds. Just saying...
Excellent point. In my view, for working people pouring $ into their 401ks every two weeks, this is the only proper means of comparison.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Jags4186 »

whereskyle wrote: Fri May 08, 2020 7:43 am
3funder wrote: Wed May 06, 2020 9:44 am This would only have been relevant to an investor if he/she invested all of his/her money at the market high and did not invest any more money in the following 20 years. Dollar cost averaging into the market would have yielded a far superior total return to that of bonds. Just saying...
Excellent point. In my view, for working people pouring $ into their 401ks every two weeks, this is the only proper means of comparison.
Every time you move the goal posts, change the rules, you manipulate results.

Someone 22 in 2000 with $0 invested who contributed $10,000 annually for 20 years did better in stocks. Had this person with $0 invested in 2000 instead invested $5000 annually into SP500 and $5000 annually into Long Term Treasuries, rebalanced annually, did better than either asset class on their own.

Someone 40 in 2000 with $100,000 who contributed $10,000 annually for 20 years did better in long term treasuries. Same deal as above, had he invested 50/50 stocks bonds he would have out performed both asset classes alone.

It's not an excellent point, in my view, to say "someone contributing regularly over that time period did better". There are just too many variables to give a meaningful answer to folks once you go down that road.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by whereskyle »

Jags4186 wrote: Fri May 08, 2020 7:59 am
whereskyle wrote: Fri May 08, 2020 7:43 am
3funder wrote: Wed May 06, 2020 9:44 am This would only have been relevant to an investor if he/she invested all of his/her money at the market high and did not invest any more money in the following 20 years. Dollar cost averaging into the market would have yielded a far superior total return to that of bonds. Just saying...
Excellent point. In my view, for working people pouring $ into their 401ks every two weeks, this is the only proper means of comparison.
Every time you move the goal posts, change the rules, you manipulate results.

Someone 22 in 2000 with $0 invested who contributed $10,000 annually for 20 years did better in stocks. Had this person with $0 invested in 2000 instead invested $5000 annually into SP500 and $5000 annually into Long Term Treasuries, rebalanced annually, did better than either asset class on their own.

Someone 40 in 2000 with $100,000 who contributed $10,000 annually for 20 years did better in long term treasuries. Same deal as above, had he invested 50/50 stocks bonds he would have out performed both asset classes alone.

It's not an excellent point, in my view, to say "someone contributing regularly over that time period did better". There are just too many variables to give a meaningful answer to folks once you go down that road.
The most important variable in my view is the fact that stocks are the most consistently impressive long-term performers, providing strong returns even in relatively poor periods, so long as one just keeps buying them. LTT is all of a sudden a darling because we're looking back at a frankly historic period of declining interest rates: 8% to about 1.5%. Let me know if you expect the same rate of decline such that we can count on LTTs keeping up these consistent returns. The fact that contributing just $100 per month to a $10,000 investment in a total stock market fund beginning in 2000 returned about 12.5% per year over what we might consider a pretty dreadful period is in my view incredible. (A $500 monthly contribution would have resulted in a 20.18% CAGR. $1000 would have resulted in a 24.12% CAGR.) Would you bet on stocks returning closer to their historical average over the next 20 years or LTT continuing their outperformance from the past 20 years? The fact that stocks are so reliably a consistent performer if you just keep buying a little bit every few weeks proves to me that simplicity really is the master key to financial success. Why bother predicting what LTTs or any other slice of the fixed-income market will do over the next twenty years when I feel much more confident I can count on stocks if I just keep buying them?
Last edited by whereskyle on Fri May 08, 2020 8:48 am, edited 2 times in total.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by PurpleArc »

seatac wrote: Tue May 05, 2020 4:21 pm From New York times

Over the long run, stocks are supposed to beat bonds. But they haven’t managed to do that uniformly since 2000, a sign of how difficult things have gotten for ordinary investors.

https://www.nytimes.com/2020/05/01/busi ... d=em-share
Do they count dividend reinvested for both?
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Jags4186 »

whereskyle wrote: Fri May 08, 2020 8:26 am The most important variable in my view is the fact that stocks are the most consistent performers, providing strong returns even in relatively poor periods, so long as one just keeps buying them.
Define period. Stocks certainly have not performed well over "relatively poor periods".
Just a little sampling since 2000
SP500 returns:
2000 - 2002: -14.6% annualized
2000 - 2009: -1.03% annualized
2008 - 2012: +1.57% annualized

If I had to bet over a 10+ year period if stocks would outperform bonds, I would on stocks. But I also bet on black or red and have less than 50% chance of being correct.
whereskyle wrote: LTT is all of a sudden a darling because we're looking back at a frankly historic period of declining interest rates: 8% to about 1.5%. Let me know if you expect the same rate of decline such that we can count on LTTs keeping up these consistent returns.
Absolutely agree. I don't think LTT will perform the next 20 years how they did the past 20 years. I think their returns will be very muted. I also wouldn't be surprised if stocks sucked wind over the next 20 years. One asset class does not need to to poorly for another to do well. And one asset class beating another doesn't mean it did well. If over the next 20 years LTT return 0% real and stocks return 1% real then I wouldn't be pounding the sand to say how great stocks performed. It is very likely that stocks will outperform treasuries over the next 10 or 20 year period. But a 10 year treasury with a positive yield will always deliver a positive nominal return. 10 years in the stock market does guarantee a positive return. Just look 2000-2009.
whereskyle wrote: The fact that contributing just $100 per month to a $10,000 investment in a total stock market fund beginning in 2000 yielded about 12.5% per year over what we might consider a pretty dreadful period is in my view incredible. (A $500 monthly contribution would have resulted in a 20.18% CAGR. $1000 would have resulted in a 24.12% CAGR.) Would you bet on stocks returning closer to their historical average over the next 20 years or LTT continuing their outperformance from the past 20 years? The fact that stocks are so reliably a consistent performer if you just keep buying a little bit every few weeks proves to me that simplicity really is the master key to financial success. Why bother predicting what LTTs or any other slice of the fixed-income market will do over the next twenty years when I feel much more confident I can count on stocks if I just keep buying them?
Calculating CAGR while including money invested is a poor way of looking at returns. Ask the Beardstown Ladies how they faired reporting numbers that way...

I think you are looking at this as a binary situation -- either stocks or bonds. You don't have to hate stocks to see the continued benefits of LTT. Every day we choose to lump sum our entire portfolio into our chosen asset allocation. Trying to bend yourself around "well if I had regularly contributed XYZ would have happened" will give you a false sense of security, IMO. There is no risk in the past.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Coltrane75 »

Jags4186 wrote: Fri May 08, 2020 8:57 am
…. There is no risk in the past.
Would you say that we find ourselves in a bit of a pickle these days because stocks are very dear and bond interest rates are very low?
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by AerialWombat »

.....
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Jags4186 »

Coltrane75 wrote: Fri May 08, 2020 9:08 am
Jags4186 wrote: Fri May 08, 2020 8:57 am
…. There is no risk in the past.
Would you say that we find ourselves in a bit of a pickle these days because stocks are very dear and bond interest rates are very low?
I’m not 100% convinced real bond returns are going to be so far off from the historical return. Lower, most likely yes, but we are in such a low inflationary environment, perhaps even deflationary for the near term future, that it’s hard to look at nominal returns today and compare them to the past. At least as a barometer of what’s “good”. 6% equity returns may be the new 10% equity returns. 2% fixed income returns may be the new 6%.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by whereskyle »

Jags4186 wrote: Fri May 08, 2020 8:57 am
whereskyle wrote: Fri May 08, 2020 8:26 am The most important variable in my view is the fact that stocks are the most consistent performers, providing strong returns even in relatively poor periods, so long as one just keeps buying them.
Define period. Stocks certainly have not performed well over "relatively poor periods".
Just a little sampling since 2000
SP500 returns:
2000 - 2002: -14.6% annualized
2000 - 2009: -1.03% annualized
2008 - 2012: +1.57% annualized

If I had to bet over a 10+ year period if stocks would outperform bonds, I would on stocks. But I also bet on black or red and have less than 50% chance of being correct.
whereskyle wrote: LTT is all of a sudden a darling because we're looking back at a frankly historic period of declining interest rates: 8% to about 1.5%. Let me know if you expect the same rate of decline such that we can count on LTTs keeping up these consistent returns.
Absolutely agree. I don't think LTT will perform the next 20 years how they did the past 20 years. I think their returns will be very muted. I also wouldn't be surprised if stocks sucked wind over the next 20 years. One asset class does not need to to poorly for another to do well. And one asset class beating another doesn't mean it did well. If over the next 20 years LTT return 0% real and stocks return 1% real then I wouldn't be pounding the sand to say how great stocks performed. It is very likely that stocks will outperform treasuries over the next 10 or 20 year period. But a 10 year treasury with a positive yield will always deliver a positive nominal return. 10 years in the stock market does guarantee a positive return. Just look 2000-2009.
whereskyle wrote: The fact that contributing just $100 per month to a $10,000 investment in a total stock market fund beginning in 2000 yielded about 12.5% per year over what we might consider a pretty dreadful period is in my view incredible. (A $500 monthly contribution would have resulted in a 20.18% CAGR. $1000 would have resulted in a 24.12% CAGR.) Would you bet on stocks returning closer to their historical average over the next 20 years or LTT continuing their outperformance from the past 20 years? The fact that stocks are so reliably a consistent performer if you just keep buying a little bit every few weeks proves to me that simplicity really is the master key to financial success. Why bother predicting what LTTs or any other slice of the fixed-income market will do over the next twenty years when I feel much more confident I can count on stocks if I just keep buying them?
Calculating CAGR while including money invested is a poor way of looking at returns. Ask the Beardstown Ladies how they faired reporting numbers that way...

I think you are looking at this as a binary situation -- either stocks or bonds. You don't have to hate stocks to see the continued benefits of LTT. Every day we choose to lump sum our entire portfolio into our chosen asset allocation. Trying to bend yourself around "well if I had regularly contributed XYZ would have happened" will give you a false sense of security, IMO. There is no risk in the past.
Agreed. I'm just pointing out what I feel is cause for optimism for total-stock-market investors by highlighting, as Bogle has, that if one were to have kept buying stocks regularly during a decade as dismal as the lost decade of 2000-2010, one would have had a positive real return. This brings me a warranted sense of confidence that I don't need to overcomplicate my stock-focused approach based on a poor 20-year period. If I keep buying VTI every week, I'll do ok even if I invest through a decade similar to the worst decade for stocks in recent history, and I'll do spectacularly in an average decade. Call me naive, but I think that is pretty amazing and a reason for cautious optimism and faith in keeping things simple. While there is no risk in the past, there is evidence in the past that buying stocks through a downturn is a better approach than not doing so, and it's an almost surefire way of securing real positive returns even over terrible 10-year periods.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
Jags4186
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Jags4186 »

whereskyle wrote: Fri May 08, 2020 9:28 am
Agreed. I'm just pointing out what I feel is cause for optimism for total-stock-market investors by highlighting, as Bogle has, that if one were to have kept buying stocks regularly during a decade as dismal as the lost decade of 2000-2010, one would have had a positive real return. This brings me a warranted sense of confidence that I don't need to overcomplicate my stock-focused approach based on a poor 20-year period. If I keep buying VTI every week, I'll do ok even if I invest through a decade similar to the worst decade for stocks in recent history, and I'll do spectacularly in an average decade. Call me naive, but I think that is pretty amazing and a reason for cautious optimism and faith in keeping things simple. While there is no risk in the past, there is evidence in the past that buying stocks through a downturn is a better approach than not doing so, and it's an almost surefire way of securing real positive returns even over terrible 10-year periods.
That's simply not true all of the time and it's easy to show you how it wasn't true for that time period.

Let's take a hypothetical person who at age 22 discovered Vanguard's SP500 fund the day it was released and starts investing in January 1976, $3000 annually, inflation-adjusted.

December 31, 1999, that person would have $1.315 million and in 1999 would have added $9097 from his pay.

This same person, now age 45 in 2000 continues to chug along for the next decade making his regular inflation-adjusted contributions. Between 2000 and 2009 this person added $105,000 to his portfolio. His year-end, 2009 portfolio value was $1.296 million.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by willthrill81 »

PurpleArc wrote: Fri May 08, 2020 8:45 am
seatac wrote: Tue May 05, 2020 4:21 pm From New York times

Over the long run, stocks are supposed to beat bonds. But they haven’t managed to do that uniformly since 2000, a sign of how difficult things have gotten for ordinary investors.

https://www.nytimes.com/2020/05/01/busi ... d=em-share
Do they count dividend reinvested for both?
Yes, but they are talking about long-term Treasuries, which relatively few investors directly hold a meaningful quantity of. Yes, TBM includes some LTT, but it mostly holds other bonds, including some corporate bonds.
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by willthrill81 »

garlandwhizzer wrote: Thu May 07, 2020 4:11 pm IMO starting at where we are now with equity valuations and bond yields, the chance that LTT will beat diversified US stocks over the next 30 years is very close to zero.
I sure hope so. 30 year Treasuries are yielding 1.31% nominal today. Historically, the odds that stocks will not beat that over the next 30 years is zero.

Further, today's LTT are very likely to have a long-term negative return if the Fed comes even close to its 2% target for inflation.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
whereskyle
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by whereskyle »

Jags4186 wrote: Fri May 08, 2020 9:50 am
whereskyle wrote: Fri May 08, 2020 9:28 am
Agreed. I'm just pointing out what I feel is cause for optimism for total-stock-market investors by highlighting, as Bogle has, that if one were to have kept buying stocks regularly during a decade as dismal as the lost decade of 2000-2010, one would have had a positive real return. This brings me a warranted sense of confidence that I don't need to overcomplicate my stock-focused approach based on a poor 20-year period. If I keep buying VTI every week, I'll do ok even if I invest through a decade similar to the worst decade for stocks in recent history, and I'll do spectacularly in an average decade. Call me naive, but I think that is pretty amazing and a reason for cautious optimism and faith in keeping things simple. While there is no risk in the past, there is evidence in the past that buying stocks through a downturn is a better approach than not doing so, and it's an almost surefire way of securing real positive returns even over terrible 10-year periods.
That's simply not true all of the time and it's easy to show you how it wasn't true for that time period.

Let's take a hypothetical person who at age 22 discovered Vanguard's SP500 fund the day it was released and starts investing in January 1976, $3000 annually, inflation-adjusted.

December 31, 1999, that person would have $1.315 million and in 1999 would have added $9097 from his pay.

This same person, now age 45 in 2000 continues to chug along for the next decade making his regular inflation-adjusted contributions. Between 2000 and 2009 this person added $105,000 to his portfolio. His year-end, 2009 portfolio value was $1.296 million.
Thanks for pointing out that distinction. Great reason to hold more bonds when I have $1,000,000. Still, for someone starting out with smaller amounts of wealth, I think this historical evidence suggests the prospects of just buying a total-stock-market index fund regularly are pretty darn good.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Taylor Larimore
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by Taylor Larimore »

seatac wrote: Tue May 05, 2020 4:21 pm From New York times

Over the long run, stocks are supposed to beat bonds. But they haven’t managed to do that uniformly since 2000, a sign of how difficult things have gotten for ordinary investors.

https://www.nytimes.com/2020/05/01/busi ... d=em-share
seatac:

Thank you for sharing an interesting article about bonds and bond funds. I'll offer three comments:

* The title is "click bait."

* The article itself is factual and reasonably balanced.

* I'm reminded that there are three kinds of lies: "Lies, damned lies, and statistics."

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future."
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firebirdparts
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by firebirdparts »

muddlehead wrote: Tue May 05, 2020 6:20 pm So, S&P 500 return since 2000 to last week 5.4% annualized. Anyone have the previous 20 years 1980 - 2000?
I have 15.5% for that period. Could be right. Data is from "slickcharts"
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FIREchief
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by FIREchief »

kabob wrote: Tue May 05, 2020 8:12 pm Sounds Wacko!
A 20Yr, $1000 5% Bond will yield $50per yr for 20Yys - then return the original $1000 the the holder.
$50 * 20Yr = $1000 total interest paid - usually considered the Total Return - That is !00% return in 20 years
But...
Image
It IS true! In Spring early 2000 SPY was around $150 - now, Spring 2020 we're less than $300, and less than 100% Return...
Didn't believe it till I checked myself - Big WOW on that.

Loss Avoidance is Soooo Important when holding Stocks. Buy and Hope & Stay the Horrors "Can" ruin your day, life and future!
Below my chosen set of favorite indicators, I choose to Take the Profit and Run and Hide in Bonds...(rationally)
My mentor was smarter than I, he always told me take my profits from stocks and buy good discounted bonds. He was Smart! - Did Well in the market. I need to keep my bond allocation higher...
Dividends???
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
chris_c
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Re: Bonds Beat Stocks Over the Last 20 Years

Post by chris_c »

FIREchief wrote: Fri May 08, 2020 2:41 pm
kabob wrote: Tue May 05, 2020 8:12 pm Sounds Wacko!
A 20Yr, $1000 5% Bond will yield $50per yr for 20Yys - then return the original $1000 the the holder.
$50 * 20Yr = $1000 total interest paid - usually considered the Total Return - That is !00% return in 20 years
But...
Image
It IS true! In Spring early 2000 SPY was around $150 - now, Spring 2020 we're less than $300, and less than 100% Return...
Didn't believe it till I checked myself - Big WOW on that.

Loss Avoidance is Soooo Important when holding Stocks. Buy and Hope & Stay the Horrors "Can" ruin your day, life and future!
Below my chosen set of favorite indicators, I choose to Take the Profit and Run and Hide in Bonds...(rationally)
My mentor was smarter than I, he always told me take my profits from stocks and buy good discounted bonds. He was Smart! - Did Well in the market. I need to keep my bond allocation higher...
Dividends???
Yes, don't forget the dividends. With dividends reinvested it's a 289.52% increase. Sill less than LTT, but quite different from "less than 100%".

SPY Jan 2000 through April 2020
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