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Inflation Takes Its Toll
A typical portfolio of stocks might earn 7 percent on average, compared with the 1.55 percent yield of a long-term bond these days. Bonds are generally considered less risky than stocks because they are less volatile, but those investing over the long run face the bigger challenge of outpacing the rise in the cost of living. When inflation is taken into account, the gains from stocks are more modest, but bonds actually lose value.