worst five-calendar- year stretch for stocks left investors with an annualized loss of 2.4%. But while any investment can disappoint in the short run, stocks do at least sparkle over the long haul. As a long-term investor, your goal is to fend off the dual threats of inflation and taxes and make your money grow. And on that score, stocks are supreme. According to Ibbotson Associates, over the past 50 years, stocks gained 5.5% a year after inflation and an as- sumed 28% tax rate. By contrast, longer-term govern- ment bonds waddled along at just 0.8% a year and Treasury bills returned a mere 0.3%.   Source: Jonathan Clements, "The Right Mix: Fine-Tuning a Portfolio to Make Money and Still Sleep Soundly," The Wall Street Journal, July 23, 1996. Reprinted by permission of The Wall Street Journal, 1996 Dow Jones & Company, Inc. All Rights Reserved Worldwide.           7.5 PASSIVE STRATEGIES: THE CAPITAL MARKET LINE   The CAL is derived with the risk-free and "the" risky portfolio, P. Determination of the as- sets to include in risky portfolio P may result from a passive or an active strategy. A pas- sive strategy describes a portfolio decision that avoids any direct or indirect security analysis.4 At first blush, a passive strategy would appear to be naive. As will become ap- parent, however, forces of supply and demand in large capital markets may make such a strategy a reasonable choice for many investors. In Chapter 5, we presented a compilation of the history of rates of return on different as- set classes. The data are available at many universities from the University of Chicagos Center for Research in Security Prices (CRSP). This database contains rates of return on several asset classes, including 30-day T-bills, long-term T-bonds, long-term corporate     4 By "indirect security analysis" we mean the delegation of that responsibility to an intermediary such as a professional money manager. II. Portfolio Theory 7. Capital Allocation between the Risky Asset and the Risk−Free Asset The McGraw−Hill Companies, 2001         CHAPTER 7 Capital Allocation between the Risky Asset and the Risk-Free Asset 197     Table 7.4