Monday, August 22, 2011

Investment Yields: Back to the Fifties?

Ancient investment folk wisdom: because stocks are risky, they must reward investors with dividend yields higher than the interest paid by bonds.

For generations that rule of thumb endured, weakening only when stock-market madness exploded in 1929. Crash and Depression restored the traditional order. Not until the late 1950s, as the notion of growth stocks took hold, did stock yields dip below bond yields. And there they stayed. By 1961, when Chemical Bank ran the ad shown here, well-chosen stocks seemed so reliable that Chemical could promise "investment growth with peace of mind."

Fifty years later, that selling proposition might get you committed.

How wary have investors become? Well, according to today's charts from, stocks once again yield more than bonds.

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