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Summary

You will find that bonds will play more of a role in your retirement income strategy than they will in your asset accumulation strategy. The reason is simple: Bonds are designed for income, not accumulation, and their historic returns have paled by comparison to those for equities. Interestingly, since 1925, the average compound return on large cap stocks has been 10.2 percent compared with 5.5 percent on long-term government bonds and 3.8 percent on U.S. Treasury bills.

But bonds are also a safe haven when the markets are rough, so you may find yourself sitting on the equity sidelines periodically, enjoying a lower return while knowing that your principal is safe.


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