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When comparing TLT (Barclays 20 year bond index) with the S&P 500 (e.g. VFINX) it looks too good to be true - almost perfect negative correlation. When the stock market crashes, TLT skyrockets in value.

But I am wondering what the disadvantages are. Is there limited upside (e.g. holding it for 30 years won't see long term gains)?

I can only find long term bond index data going back to 2000. Shiller only has bond yields. Where can I find bond index data going back to the early/mid 1900s?

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The Barclay's 20+ Year Treasury Bond inception date was July 21, 2002. You aren't going to find treasury bond information going back to 1900 because Treasury Bills have only been issued since 1929. The U.S. Department of the Treasury will give you data back to 1990.

There's a good article in the Globe and Mail which covers why you may want to buy bonds as part of your portfolio. The key is diversification. Historically, stocks have done better than bonds long-term, but when stocks fall, bonds tend to (though do not always) go up.

If you are investing for 30 years, the risk of putting money into bonds is that you will not make as much money as if you had put the money into stocks. Historically (in the US or Canada), you'd have seen positive returns, just not as high as investing in the stock market.

There are many investment strategies. I live in Canada and personally favour the one described in the Canadian Couch Potato, a passive index investment strategy where I invest my money in Canadian, U.S. and International equity (stock market mutual funds) and also in a Canadian bond fund. There are, of course, plenty of people who will tell you to take a radically different strategy with your investments.

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  • Thanks for the reply. What I really want is bond value rather than bond yield. But I hope your 3rd paragraph is telling me what I want - that if I put $1000 in a bond ETF today, will I have more money in 30 years time than in 10 years time (nominal). – Sridhar Sarnobat May 11 '12 at 19:07
  • There are different types of bond funds. See investorguide.com/… You are NEVER guaranteed to make money, but investing in US Treasury Bond funds means your investment is backed by the US government. If the US was invaded and occupied, for example, the bonds would be worthless, but that's rather unlikely over the next 30 years. – ChrisInEdmonton May 12 '12 at 1:50
  • Note that the US stock market has historically outperformed the US bond market over most long time frames. It less than 30 years (25) for the market to recover from the 1929 crash. But only two years to recover from the next worst crash, Black Monday in 1987. My point is, over 30 years, I think you should consider stocks. But a bond fund that invests in US treasuries should all but guarantee you a return, yes. – ChrisInEdmonton May 12 '12 at 1:58
  • Thanks Chris. I am investing in stocks too (namely VT). I am looking to diversify my portfolio beyond stocks which is why I want to understand the TLT fund with as much historical info as possible. – Sridhar Sarnobat May 14 '12 at 17:36
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I use TLT to smooth the volatility of my portfolio of mutual funds. I keep 15% of each of the following: FSMEX, FSRPX, FSCSX, FSUTX, FNMIX, and TLT, with 10% in cash at all times. It has worked well for 20 years, but I don't have data for TLT prior to that.

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