Stock and Bond Volatility Varies

Stocks and bonds have experienced different levels of return over the past 98 years.

Although stocks exhibited tremendous volatility before World War II, the stock market has been much less dramatic since that time. Conversely, bonds exhibited stability in earlier periods, but have seen dramatic increases in volatility over the past 30 years.

One relationship has remained constant: Stocks have been more volatile than bonds on a month-to-month basis. Over the long term, however, stock investors have been rewarded for assuming this greater volatility.

Government bonds are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds.

About the data

Large stocks are represented by the Ibbotson Large Company Stock Index. Bonds are represented by the 20-year U.S. government bond. An investment cannot be made directly in an index. The data assumes reinvestment of all income and does not account for taxes or transaction costs.