Bonds vs. Stocks

Chart of the Week for November 5-11, 2004

A sluggish third quarter for equity markets didn’t carry over into the bond market. Bonds outperformed stocks by 5.7% for the quarter. U.S. intermediate-term bonds returned 3.9% while the S&P 500 saw a loss of 1.9%. Additionally, the benchmark 10–year Treasury Note saw a 5.0% return in the third quarter and its yield fell to 4.12% to end the quarter, after reaching 4.49% in July.

Investors are often warned to avoid attempting to ‘time’ their investments in equity markets and the same rule applies to bond markets. As you can see from the chart, bonds underperformed stocks last quarter while outperforming them in the first and third quarters of this year. These results continue to emphasize the value of holding a long-term, diversified portfolio when saving for retirement.

* The illustration was created from information provided by Ibbotson Associates, a leading independent provider of economic, financial, and industry research designed to meet the diverse planning and information needs of businesses, governments, and professional investors and is not affiliated with the ICMA-RC). The S&P 500 is an Index of 500 Stocks, a widely recognized, unmanaged index of common stock prices. A fund’s portfolio may differ significantly from the securities held in the indices. Indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the active management of an actual open-ended investment company portfolio. Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 1-800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240, or by visiting www.icmarc.org. Please consult both the current Vantagepoint Funds prospectus and MAKING SOUND INVESTMENT DECISIONS: A Retirement Investment Guide carefully for a complete summary of all fees, expenses, charges, financial highlights and investment objectives, risks and performance information prior to investing any money. Vantagepoint securities are distributed by ICMA-RC Services LLC, a broker dealer affiliate of ICMA-RC, member NASD/SIPC. For a current prospectus, contact ICMA-RC Services LLC, 777 North Capitol Street NE, Washington, DC 20002-4240. 1-800-669-7400. AC:1004-91.