Investment Risk & Return 1958 - 2008

The chart below shows the risk and return on stock, bond and gold investments from 1958 - 2008. Notice that a balanced investment (55% stocks, 30% bonds, 15% gold) has a return of almost 10%, with less risk than bonds!

Balanced investments have a superior risk-return-profile because of diversification: if stocks go down, bonds usually go up. That's why a balanced investment is almost immune to periods of "irrational exuberance" (when people buy stocks at any price) or "flight to quality" (when investors dump their stock to buy bonds or even gold).