The tortoise and the hare.
Tortoise and hare...there's a lot to be said for the slow but steady approach offered by bonds when it comes to investing.
Once the poor relation of the investment world, 'steady-as-she goes' bonds continue to lay down a solid track record.
Time heals all wounds but it still hasn't fixed the sharemarket.
In any of the past five years you would have done better with an online bank deposit than in the average share.
Go back 10 years, so you get the benefit of the biggest bull run ever in the sharemarket, and the picture should be different.
Only it isn't. It's neck and neck between shares and, of all things, government bonds.
In fact, at the low point of the financial crisis, bonds had done better than shares for the previous 20 years.
Roger Bridges, who as head of fixed income at Tyndall Investment Management runs a bond fund, says: ''I was telling everyone here that maybe our fund is the growth asset now.''
Fiddling with the starting or finish year, you can manipulate the returns to put the sharemarket in a better light but the point is, bonds aren't just a poor relation.
They're where you go when everything else goes wrong. Or rather, they're protection before everything goes wrong.
Financial planners see bonds, which are less volatile and make investing less of a punt, as insurance against the sharemarket.
Whatever happens, a gilt-edge bond will always pay and you're guaranteed to get your money back.
Providing a decent return is also true of fixed-income securities generally - that is, anything that pays a set interest rate and gives you your money back at the end.
Oh, so they're glorified term deposits then?
Not quite. The difference is you can get in or out of bonds whenever you want.
But there's a more subtle and, when the crunch comes, critical difference with government and bank-issued bonds and chasing the best cash return. They aren't punting on either the China boom going forever or the US economy hitting its stride in the near future. That's what an investment in the sharemarket boils down to but it's also true of cash.
One is chasing growth in its own right and the other high interest rates, which are a side effect of it.
To put it another way, super funds or any other portfolio that is made up of shares and cash is a one-way bet on economic growth. As the GFC showed, that can't always be counted on.
''They're betting everything on the favourite and not covering themselves,'' Bridges says.
Still, there's a reason that most avoid bonds. Put it this way - the fact that they've been doing better than shares says a lot more about the sharemarket.
Yields on government bonds range from about 5.10 per cent for three years to 5.5 per cent for 10 years. But the banks have finally realised there's a yield gap here and are offering something better.
The Commonwealth Bank was the first to issue a retail bond last year. It pays a fixed 1.05 per cent above the variable 90-day bank-bill rate, which works out at just under 6 per cent.
Since the top term-deposit rate is 7.15 per cent for five years offered by Rabobank, that doesn't look crash hot.
The market agrees, having marked the $100 five-year bonds (ASX code CBAHA) down to about $99, which bumps the yield up to just over 6 per cent if you buy at that price.
The Bendigo and Adelaide Bank has topped that, offering an extra 1.4 per cent above the bank-bill rate, a yield of about 6.3 per cent for a three-year bond.
Unlike the CBA's, though, it's trading in the market (code BENHA) at a premium so the yield is slightly lower for newcomers. Um, trading may be too strong a word.
The bond goes for weeks without a single trade but at least the buy quote is above the $100 issue price. Since both have a floating rather than a fixed rate, they protect you against a Reserve Bank rise.
The higher rates go, the more they pay. That should also protect from rising inflation, which food and petrol prices suggest is starting to stir.
Incidentally, the government also has an inflation-protecting bond. The Treasury-indexed bond adjusts the face value every quarter by the rise in the consumer price index.
Only institutions can bid but you can pick one up in the market through a fixed-interest dealer or broker.
The only trouble is that while it protects you against inflation, it doesn't do much else. The interest rate is paltry - on the latest series issued last week it was just 2.5 per cent.
Frankly, if you're worried about inflation then you'd be better off in something offering high interest.
After all the CBA or Bendigo bonds are tied to the 90-day bank-bill yield, itself based on the official cash rate. If inflation goes up, so will the cash rate as the Reserve combats it.
The banks have other fixed-income securities linked to the bill rate as well, which are riskier but in return pay more. Income securities are one. These were a fad for a while in the early noughties but all came to grief.
Yet that's what makes the few survivors attractive - their prices have been marked down so far from their $100 face value that the yield is pushed up.
Or to put it another way, a dollar paid in interest on a $90 investment is a better return than on $100.
A curiosity is they're supposed to last forever, like the mad bunny in the battery ad on television. There's no maturity date on which you're promised your money back. So the only way out is by selling them on the market (they're listed on the ASX).
The four left were issued by Bendigo and Adelaide Bank, Macquarie, NAB and Suncorp. ''We like the NAB income securities, which, priced about $82, give a running yield of 7.5 per cent,'' says a director of FIIG Securities, Brad Newcombe.
''If interest rates go up, you get leverage to the bank-bill rate that will also go up.''
And because of the Basel III changes to bank liquidity rules, he predicts they'll be restructured ''and that would be the kicker for an increase in the price''.
For an even higher yield, ANZ, CBA and Westpac have converting preference shares, one of a group of securities known as hybrids because they're not quite bonds but they aren't shares either.
Truth be told, though, they're closer to shares. After all, the reason their post-tax yield is higher is that the ''interest'' they pay is fully franked and so comes with a 30 per cent tax credit.
And if that doesn't reveal their true nature, try this. At maturity they typically convert into shares of the mother stock with the bonus of a small discount.
The most popular bank hybrids are the CBA's series of Perls. Each differs slightly from the other and you can still buy the last three in the market, all below their $200 issue price.
The bank redeemed Perls II two years ago for cash on the so-called rollover (as distinct from maturity) date.
Because series III and IV are trading below their $200 face value, you'd be looking at a capital gain of about $15 and $5 respectively when the bank redeems it.
That's an income of about 6 per cent fully franked plus an eventual capital gain of a further 7.5 per cent for the IIIs and another 2.5 per cent for the IVs.
Perls V are trading at a premium and little wonder, since the margin above the bank-bill rate is a hefty 3.4 per cent and so the yield is 8.3 per cent fully franked if you subscribed originally, or just under 5 per cent if you were to buy them now, which probably wouldn't be a good idea.
But wait, there's more. When the bank hybrids convert into shares there's a bonus discount of 1 per cent or 2 per cent.
ANZ has two series of converting preference shares (ANZPA and ANZPB), with margins of 3.1 per cent and 2.5 per cent respectively. Both trade at a premium that brings their annual yield to about 8 per cent fully franked, taking into account the bonus at conversion time.
Remember: the yield on bank hybrids can change every quarter - though it's unlikely to drop in the foreseeable future - when they also pay dividends.
An exception is Macquarie's MQCPA, which has two years left to run paying a fixed 11.1 per cent and isn't franked.
Still, that works out at an annual 10.3 per cent for two years based on its last traded price, which is a lot better than you'll get from a term deposit.
Because they trade on the ASX their price can drop, too, a fate that has befallen all those issued earlier than last year.
It just takes one bank to break ranks with a new issue offering a better return to mark down the prices of everything that's come before it.

Taking a safe punt

The heat seems to be coming out of the term-deposit war between the banks.
If you're hoarding cash because you don't trust the sharemarket, don't have enough for a property and think bonds are lame, there is an alternative. Rather than go the whole hog into the sharemarket, you can dip your toe in and still be assured of a decent return.
So-called step-up securities trading on the ASX are returning close to double digits. These convert to shares in the mother stock on a certain date, or are extended with a higher interest rate.
Australand Assets (AAZPB) pays 4.8 per cent above the 90-day bank-bill rate, which has been hovering around 4.9 per cent, or 10 per cent since you can pick them up for $95 despite their face value of $100.
Or there's Multiplex Sites (MXUPA) with interest at 3.9 per cent above the bill rate but because they're trading well below their face value "there's a 20 per cent upside'', so long as they're redeemed, says a director of FIIG Securities, Brad Newcombe.
Another well-regarded step-up security is Goodman PLUS, which has also been heavily marked down by the market, so boosting its yield. Its step-up date is March 2013, when it will be either swapped for its $100 face value or the interest rate will be increased. In the meantime, there's an 8.5 per cent yield based on its last price of $80.
"When investing in fixed income, a combination of government bonds, semi-government bonds, high-quality corporate bonds and some listed subordinated hybrids is prudent,'' says the head of investment strategy and consulting at UBS Wealth Management, George Boubouras. ''Even an aggressive investor should not hold more than 25 per cent of their fixed-income weighting in listed, subordinated hybrids."
He recommends conservative investors, such as those whose super is paying a pension, should have 40 per cent of their investments in domestic fixed income.
For moderate investors it would be 15 per cent and for aggressive ones 10 per cent. Mortgage funds were once a popular outlet for finding a good fixed income. Not any more. The chief executive of Hewison Private Wealth, financial planner John Hewison, won't touch them.
"Remember Estate Mortgage?'' he says. ''People see them as being like a bank account but they're long-term securities and have a propensity to be frozen. We like to have absolute control over a property and secured by a first mortgage."