Long-Term Investments and Placements…If Only We’d Known

Bond prices

In contrary to what the chartists say, equities are not always a better investment bet than bonds. Read John Authers’ article where he provides a summary of what has happened in the last 10 years.

US bonds have posted annual gains of 8.4%, compared with the stock market’s 7.65%, always supposing that no asset management errors were committed in the short-term: it’s possible that the stock market is a profitable investment, but it’s not a certainty due to its volatility. So in summary: it wasn’t worth it, so much chartism, and so many management costs – which swallowed up a good part. A simple, boring bond would have made you much richer, significantly richer. Of course you needed to know what was going to happen. The ingenious Austrians, those who include a good dose of reality in their thinking, bet that expansive monetary policy was going to fuel hyperinflation. And as a result, interest rates on bonds were going to go through the roof: whoever held bonds was going to lose their shirt (the price of bonds falls when rates go up). A big mistake.


About the Author

Miguel Navascués
Miguel Navascués has worked as an economist at the Bank of Spain for 30 years, and focuses on international and monetary economics. He blogs in Spanish at: http://http://www.miguelnavascues.com/