When Bonds Beat Stocks

bonds beat stocks

Well, at least for the last 12 months, bonds have been a better investment than stocks.

The total return of the Vanguard Total Bond ETF (BND) is up 5.81% over the last 12 months. Meanwhile the S&P 500 ETF (SPY) is up just 4.94%.

Who would have thought you could “beat the market” over the last 12 months investing in vanilla bonds. Especially since bonds have been much maligned in recent years. Only a fool…

Even Warren Buffett said you’d be downright stupid to invest in bonds, especially long term bonds.

But guess what? The 20+ year treasury bond ETF (TLT) has returned 8.35% during the last 12 months.

Of course, Buffett will most likely be right 10, 20, 30 years from now. But not everyone has a infinite time horizon and risk tolerance.

Bonds are just not as volatile as stocks, and they pay a monthly dividend, which for me has a very reassuring psychological effect.

Let’s face it – this game is totally psychological. If it was all about the numbers it would be easy.

Sure, in my retirement account I’m heavily weighted towards stocks. But when it comes to money I can withdraw any time, I have a fair amount in bonds.

Lately it’s been been paying off.