Chart of the Week: How do stock, bonds and cash returns vary?
Hat tip to Beth Tallman for this idea:
Explanation: This chart graphs the range in annual returns for stocks, bonds and cash (think savings account) with the average indicated in blue.
- One of the core tenets in investing relates to the relationship between risk and return. Complete this sentence: the higher the risk of an asset, the _______ the expected return.
- Which of the following assets (stocks, bonds or cash) has the highest risk? Which asset has the highest range of returns?
- Do you think it would have been difficult to own stocks in the year that it dropped 43.8%?
- Why do you think cash (akin to a savings account) doesn't go below 0?
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
To get access to NGPF answer keys, assessments, and teacher-only resources: create a FREE Teacher Account