Tags: siegel | stocks | bonds

Siegel: Stocks Will Continue To Beat Bonds

By Julie Crawshaw   |   Monday, 04 May 2009 03:37 PM

Wharton professor Jeremy Siegel says nervous investors should remember one thing: Stocks have beaten bonds over the long-term and should continue to do so now.

"The premium I find over the long run on stocks over bonds is about 3 percent a year," Siegel said during a recent interview.

"That premium — although in the short run it can certainly be up and down over periods of decades and generations and even centuries — has been relatively constant and, therefore, for someone planning 30, 40 years into the future for their retirement, that difference could obviously accumulate to a very large sum in favor of stocks."

People have to be paid to take on risks, Siegel notes.

“Since stocks are the residual after bonds and other claimants have their say, it's natural that stocks would have a higher return,” he says.

“What has tended to surprise economists is that extra return seems to be very generous over long periods of time.”

Bonds can and do outperform stocks over long periods, says investing journalist Will Deener.

“The annualized return of the stock market over the 10-year period ending March 31 was a negative 3 percent, according to Morningstar,” Deener notes.

“During that same period, long-term government bonds returned 8.2 percent.”

“If the great bear market of 2008 does nothing else, perhaps it will finally force investors to consider alternatives to the stock market for at least part of their portfolios.”

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Wharton professor Jeremy Siegel says nervous investors should remember one thing: Stocks have beaten bonds over the long-term and should continue to do so now."The premium I find over the long run on stocks over bonds is about 3 percent a year," Siegel said during a recent...
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