Nobody can predict the short-term direction of the stock or bond market. Returns can be exceedingly high or low during any short period. The chart below clearly shows that if an investor was willing to hold quality investments long-term, the simple compounding of gains and dividends at their traditional rates would have made a disciplined investor a profit. You can see that over long periods of time stocks outperformed bonds and Treasury bills by about two to one. Please note that since 1981 bonds have had many strong years as interest rates tumbled from their all-time highs.

Source: CDA Weisenberger

Bars represent average annualized rates of return. Investors should note that Treasury bills are guaranteed by the U.S. government, as to the timely payment of principal and interest, while corporate bonds and stocks are not. Stocks also tend to be most volatile, while bonds offer a fixed rate of return. In general, the higher the risk, the higher the potential return. This chart is for illustrative purposes and does not represent the performance of any single investment. Past performance is not indicative of future results.

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