'Retro' Investing--Look Back to Get Ahead
Break out the poodle skirts and crank up the Perry Como.</br></br>It's often said that investors these days are navigating uncharted territory. The world's major economies are swamped by massive amounts of debt, the Federal Reserve has essentially locked interest rates at zero and the outlook for corporate profits is increasingly cloudy.</br></br>Many investors are paralyzed by this environment, which is unlike anything they have seen in their adult lives. As a result, they're hunkering down in cash and super-safe government bonds. However, as is often the case, investors can look to the past and find potential guideposts for building a portfolio for today's markets.</br></br>In this case, history suggests that stocks with higher dividends could be in for a long period of healthy returns. Looking at the broad stock market, history suggests stocks in general could struggle compared with government bonds as long as rates are capped by the Fed, which is contrary to the conventional wisdom today. But for the longer term, stocks are a better bet than bonds.</br></br>For their history lesson, investors should set their wayback machines to the period beginning in the late 1940s. It was a time when bond-market interest rates didn't float freely as they usually do, but instead were capped by the government at low levels to help the country manage the enormous debts accumulated during World War II.