The point I was thinking of is that even if bonds funds don't do as well as equities, they don't go down as much in a down cycle. That means that they don't have to recover as far up.
Bonds fluctuate less than stocks, that's right. Traditionally, they are therefore considered less "risky". However, variance is just one measure of risk. It has been used in economics a lot because it fits nicely into mathematical models, but it is by no means the only thing you should take into account.
In other words, maybe bonds don't go down nominally
. What counts are real
returns. At this point in time, you are almost assured a real return (after inflation) of +/- zero if you buy investment grade bonds. If capital preservation is your priority, that maybe fine for you. But you will most certainly not make any money. (This is an opinion, but I'm willing to put my money where my mouth is.) Where do you think interest rates are headed in the mid-term - down or up? Where do you think inflation rates are headed? Hint: There's not too much "down" left. What does this mean for bonds?
If by 'tiny sample' you mean my own personal situation, yeah, you're right. If you mean a 15 year average is a 'tiny sample', I'm not sure that's a good point.
I was indeed referring to the time period. 15 years is nothing compared to the several hundred years during which stocks have outperformed bonds. Bonds have done well over this most recent period because interest rates have declined to historic minimums. Unless you believe we will soon see negative interest rates, there is just no way this trend will continue.
In addition to that, bonds carry default risk very similar to stocks, but the returns are capped. While there are certainly not many things to be sure of in the investment world, I believe the following is a universal truth: Going 100% bonds is a suckers bet.