According to Research Affiliates LLC's Robert Arnott in an article found here in the May/June issue of Journal of Indexes, for the previous 10 years, 20 years, and 40 years long-term Treasury bonds have outperformed the broad stock market. In fact, over the long term, the out performance of stocks versus bonds from 1802 through February 2009 averages only 2.5% per year- a much lower figure than most investors would ever imagine.
The article goes on to say that "For the long-term investor, stock markets are supposed to give us steady gains, interrupted by periodic bear markets and occasional jolts like 1987 or 2008. The opposite-long periods of disappointment, interrupted by some wonderful gains-appears to be more accurate."
The answer? Don't shy away from having bonds in your portfolio. The long term yields are not that different than stock yields and bonds will certainly add a bit of income and stability to your overall portfolio.