Given how badly the stock market has performed over the past decade, a lot of people have started to question the wisdom of having the majority of your portfolio invested in stocks. In particular, some are looking at bonds as a viable alternative not just for short-term income but also for better long-term investing results.

A historical precedent
Earlier this year, investment researcher Rob Arnott released some interesting data. Looking back over the 40 years that ended in February 2009, Arnott noted that the much-vaunted "risk premium" -- the extra return that stock investors are supposed to get in return for the added risk they take over safer investments like Treasury bonds -- turned out not to exist. Specifically, between 1969 and 2009, investors would have been better off buying long-term Treasury bonds and rolling them forward than buying stocks.

As it turns out, though, the reason why bonds have outperformed stocks over the past 40 years has more to do with how extraordinary well bonds have performed than it does any bad performance from stocks. According to stock expert Jeremy Siegel, both have had average annual returns of around 12% over that time frame. But therein lies the problem for those who think that bonds can continue to outperform.

What it takes to earn 12%
The challenge bond investors face in today's environment is that opportunities for safe investments with high yields are just about gone. Even the longest-term Treasury bonds earn just 4.33%, while Treasuries in the five-to-10-year range earn between 2.5% and 3.5%. Rates were much higher in 1969, and in between, interest rates spiked to extremely high levels during the late 1970s and early 1980s. As rates came down, Treasury investors saw not only healthy income from those high-interest bonds, but also big capital gains as well.

Looking forward, though, there's simply no way for interest rates to come down far enough for bonds to enjoy the same sort of gains. At a 12% return, you'd roughly triple your investment in 10 years. But even if rates fell to 0%, a current 30-year Treasury yielding 4.3% would only double in price. Even a more modest 8% return would require rates to fall dramatically -- more than they're likely to fall in any realistic scenario.

To get better rates, you'd have to leave the realm of safe Treasuries and venture into corporate bonds. But even there, you'd have a lot of trouble finding issuers willing to pay you double-digit returns on your money. Consider some of the latest quotes available:

Issuer

Bond Maturity

Current Yield

Kraft Foods (NYSE:KFT)

Feb. 2018

5.2%

Citigroup (NYSE:C)

Aug. 2014

5.6%

American Express (NYSE:AXP)

March 2038

6.9%

Weyerhaeuser (NYSE:WY)

March 2032

9.0%

Hewlett-Packard (NYSE:HPQ)

March 2013

2.7%

Home Depot (NYSE:HD)

2013

5.0%

Leucadia (NYSE:LUK)

2013

7.7%

Source: Wall Street Journal.

You can see that even these bonds won't get very close to 12%. Meanwhile, you're taking on considerable default risk with some of these issuers -- risk that exposes you to the same potential for losses that stocks have.

The best of bonds, the worst of stocks
Meanwhile, on the other side of the comparison, stocks clearly weren't at their best in February. By now, with stocks up 50% from their levels in late February, stocks have moved back ahead of bonds over the past 40 years.

Still, that won't stop critics from pointing out the negative returns that the stock market has suffered in the past decade. Nevertheless, you have to remember that those comparisons are with stocks at the top of the tech bubble. Making comparisons between asset classes doesn't make sense when one class went from historic highs to historic lows, while the other did practically the opposite. Drawing conclusions from those comparisons can lead you to make huge mistakes.

Bonds certainly have a place in every investor's portfolio. But they can't entirely replace stocks for most investors. For bonds to outperform stocks over the long run is extremely unlikely. With bonds so expensive and stocks so cheap, it's much more likely that we'll see a period of substantial outperformance for stocks in the coming years.

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Fool contributor Dan Caplinger owns a mix of stocks, bonds, and other investments. He doesn't own shares of the companies mentioned in this article. Leucadia is a Motley Fool Stock Advisor selection. American Express and Home Depot are Inside Value picks. The Fool formerly owned shares of American Express. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy is still in its teens and is ready to face the next 40 years.