Personal Finance 1307

We have discussed how although bonds are not risk-free they represent a more conservative investment than other options (like stocks).  This lower risk also means lower return.  In fact, since World War 2 bonds have grown on average 5% annually while stocks have grown 10%.  Using the rule of 72 that means it would take 14.4 years for your money to double if fully invested in bonds and 7.2 years if invested in stocks. In other words, at those historical rates of return, if you invest $10,000 in bonds almost 29 years later you would have $40,000.  If you invested that same amount of money in stocks then you would have $160,000 in almost 29 years!  To get the most out of your investments it is imperative you understand stocks and not to panic when the market tumbles.