Here’s a chart I look to look at every so often. It’s stocks versus bonds which is the classic Wall Street grudge match.

For my stock proxy, I use the Vanguard 500 Index Fund (VFINX) and for bonds, I use the Vanguard Long-Term Investment-Grade Bond Fund (VWESX). I suppose people could quibble with those choices, but I think they’re broadly fair. The data here goes back to 1990. (Note that the chart has a log scale.)

Ideally, stocks should return more than bonds, but only by a little bit. I think the equity risk premium has probably been overstating, but I do think it’s really. It’s probably around 1.5% to 2% long-term. The chart here shows how disruptive the stock market of the late 90s was. Bonds have beaten stocks over the last ten years, and over the last 14 through 19 years.

As a long-term investor, it’s disconcerting that simply relaxing in a bond portfolio has been so competitive with stocks. Will that continue? I’m not so sure.

The current yield for VWESX is 4.21%, which makes me think that stocks are due for some more outperformance. Just the dividend yield gets you halfway there.