Bonds vs equities a common question

At Enable of Bishop's Stortford our experienced independent financial advisors are often asked this question, how do bonds compare to equities. Asking simple questions often provides a good way of drawing attention to how perceptions can differ from reality when talking about financial markets.

 It is also a question Juan Nevado a fund manager from the M&G multi asset team has recently been addressing asking “Over the past 30 years, would it have been better to be an equity investor or a bond investor? Considering the massive tailwinds bonds have experienced, it probably would not surprise many people that bond investors in most developed markets have just experienced a 30-year bull market. However, it is interesting to note that in many regions, since the late 1980s, equities have delivered real returns in line with – or even higher than – bonds. It is interesting because the only benefit of holding bonds over equity over the period as a whole has been much lower volatility. It is also notable that since 2008, cash, the ultimate perceived haven, has lost value while both bond and equity investors have made money.”

Many have suggested that investors could have expected bonds to deliver much more than equities. The shock of the 2008 financial crisis of course ignited a prolonged period of broad-based risk aversion which investors may still not have fully shaken off, this most definitely will have had some impact on equities.  Alongside this there has of course been the business of central banks engineering a bond rally by stimulating massive demand through extraordinary levels of quantitative easing.  In the light of this most investors would probably still feel much lower volatility for comparable returns is the obvious choice. To talk over your investment choices Enables IFA’s are happy to share their experience.

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