While paging through the latest issues of Forbes and Money, I noticed something amusing… Both magazines were chock full of advice on how to navigate the current economy with your finances intact. No surprise there. What surprised me was that the two publications were offering completely opposite advice.
Invest in bonds!
For their part, Forbes advised readers to “Dump Stock, Buy Bonds,” arguing that history indicates that we should shun stocks in favor of corporate bonds.
Of course, this isn’t the first time we’ve heard this argument… In fact, I wrote earlier this week about the performance of stock vs. bonds when I highlighted Richard Arnott’s work showing that stocks can underperform bonds for significant periods of time.
Invest in stocks!
In contrast, Money sliced and diced the numbers differently and came to an entirely different conclusion. In fact, in an article entitled “Why Buy Stocks if Bonds are on Top?” author Paul Lim argued that:
“In all 880 rolling 10-year spans since the end of 1925… bonds [only beat stocks] 17% of the time.”
Moreover, lengthy periods during which bonds have outperformed stocks (such as we’re currently experiencing) have proved to be “great buying opportunities for … patient and value-minded [investors].”
The way forward
So which is it? Should you be focusing on your investments on stocks or bonds?
My advice is to ignore the noise. Develop an investment strategy, including a well-defined asset allocation plan, and then stick to it.
Remember… Magazines exist for one reason: to sell copies. Don’t look to them for detailed investing advice.