Stocks, Bonds, and Long-Term Risk

Across the developed markets, stocks have been safer investments than government bonds as the time horizon lengthens.

John Rekenthaler 15 September, 2015 | 17:17
Facebook Twitter LinkedIn

Reviewing the Numbers
Last week's column discussed a theoretical reason, offered by Nobel Laureate Paul Samuelson, as to why stocks might not become relatively safer over time. Most people believe that stocks are too risky to own for short periods, such as one year, but are prudent investments for time horizons that stretch over decades. Samuelson says otherwise. (His argument does not convince me, but perhaps it convinces you.)

This column has a simpler topic: the empirical results. Regardless of what one thinks of Samuelson's logic, or of any other claim that time horizon does not matter for asset allocation, there's no question about the track record. Across the developed markets, stocks have been safer investments than government bonds as the time horizon lengthens--not just for a few countries, or a few decades, but for 19 markets spanning 110 years. 

My source is a database assembled by the English professors Elroy Dimson, Paul Marsh, and Mike Staunton, which was then processed by Argentine finance professor JavierEstrada of IESE Business School. Estrada emailed me a few weeks ago, stating that the column Why Not 100% Equities? might have understated its case, because stocks not only figured to make more money than bonds over the long term, but in a real sense they might be also be safer. This column, effectively, consists of his material.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free
Facebook Twitter LinkedIn

About Author

John Rekenthaler  is vice president of research for Morningstar.

© Copyright 2021 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy