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Until recently, no single word caused investors' eyes to glaze over more quickly than "bonds" (except maybe "annuities"). Unlike stocks, which gushed a 16.7 percent average annual return from 1994 to 2000, bonds managed to crank out only 6.7 percent a year. Even after stocks began their long journey south in March 2000, investors hung on, sinking billions more into equity investments. Deep into 2001, investors finally caught on; while Vanguard's Total Stock Market Index Fund, which tracks the entire market, plunged 20.7 percent, its Total Bond Market Index Fund earned a respectable 8.5 percent. Suddenly bonds looked a whole lot more interesting.
Diversifying ...