There are many myths about investing. One of the most popular myths is that “Stocks always beat bonds.” Therefore, the thinking goes, investors should overweight stocks in their investment portfolio if they want to generate higher returns. 

Well, as Harry Browne would have said: “The best kept secret in the investing world: Almost nothing turns out as expected.”

When I was restructuring my investments several years ago and considering the Permanent Portfolio I did quite a bit of my own research. And you know what I found? Stocks in fact do not always beat bonds. Or, I should say, they don’t always beat bonds on your particular time table. 

Sure, perhaps if you look back 200 years you can make a case that stocks have a better chance of beating bonds. After all, there is more risk so theoretically there is more reward. But individual investors don’t have a 200 year time horizon. Most don’t have even a 50 year time horizon. For many people their investment horizon before they need that money for retirement purposes is more like 20 to 40 years. When you look at time slices of the market from this perspective it is clear that stocks can in fact lose to bonds in total returns.

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