ing period increases, the probability that stocks will outperform fixed-
income assets increases dramatically. For 10-year horizons, stocks beat
bonds and bills about 80 percent of the time; for 20-year horizons, it is
over 90 percent of the time; and over 30-year horizons, it is virtually 100
percent of the time.
As noted in the last chapter, the last 30-year period in which bonds
beat stocks ended in 1861, at the onset of the U.S. Civil War. This is a
point worth remembering: never in any of the past 175 years would a
buyer of newly issued 30-year government bonds (had they been issued
on an annual basis) have outperformed an investor in a diversified port-
folio of common stocks held over the same period.
Although the dominance of stocks over bonds is readily apparent
in the long run, it is also important to note that over one- and even two-
year periods, stocks outperform bonds or bills only about three out of
every five years. This means that nearly two out of every five years a
26 PART 1 The Verdict of History
TABLE 2–1
Holding Period Comparisons: Percentage of Periods When Stocks Outperform Bonds and Bills