Historical and expected returns

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Historical and expected returns provides historical market data from Burton Malkiel as well as estimates of future market returns from William Bernstein and Rick Ferri.

Historic returns

Burton Malkiel

Burton Malkiel, author of A Random Walk Down Wall Street provides historic asset class returns.

Historic (nominal) returns 1926-2005, source: Ibbotson Associates[1]
Series Geometric Mean Arithmetic Mean Standard Deviation
Large Company Stocks 10.4% 12.3% 20.2%
Small Company Stocks 12.6% 17.4% 32.9%
Long-term Corporate Bonds 5.9% 6.2% 8.5%
Long-term Government Bonds 5.3% 5.5% 5.7%
U.S. Treasury Bills 3.7% 3.8% 3.1%
Inflation 3.0% 3.1% 4.3%

Expected future returns

William Bernstein

William Bernstein with a summary of reasonable expected returns, derived from the dividend discount model, published in 2014. [2]

Expected Long Term Real Returns.
Source: Rational Expectations: Asset Allocation for Investing Adults (Investing for Adults) (Volume 4)[3][4]
Asset Class Expected Real Return
U.S. Large-Cap Stocks 2%
U.S. Large-Value and Small-Cap Stocks 3%
U.S. Small-Value Stocks 4%
Developed Foreign Stocks 5%
Emerging Markets Stocks 4%
REITs 1%
Precious Metals Stocks 1%
Base Metals and Oil Stocks 3%
Treasury Bills, Notes, and Bonds -1%

Bernstein's estimates in 2002 are below:

Expected Long Term Real Returns.
Source: The Four Pillars of Investing[5]
Asset Class Expected Real Return
Large U.S. Stocks 3.5%
Large Foreign Stocks 4%
Large Value Stocks (foreign and domestic) 5%
Small Stocks (foreign and domestic) 5%
Small Value Stocks (foreign and domestic) 7%
Emerging Market / Pacific Rim Stocks 6%
REITs 5%
High-Yield ("Junk") Bonds 5%
Investment-Grade Corporate Bonds; TIPS 3.5%
Treasury Bills and Notes 0-2%
Precious Metals Equity 3%

Rick Ferri

Rick Ferri, author of All About Asset Allocation

The table below is an expected return for all major equity and fixed income asset classes over the next thirty-years. It could be used as guide when constructing a long-term diversified portfolio. These estimates are not expected to be completely accurate. Actual returns will likely differ in several asset classes.

Thirty-Year Estimates of Bonds, Stocks and REITs
Assumes a 2.0% Inflation Rate. Source: Portfolios Solutions[6]
Asset Classes Real Return
(Inflation Adjusted)
Nominal Return Risk
Government Backed Fixed Income
US Treasury Bills (1 year maturity) 0.1 2.1 2.0
10-year U.S. Treasury notes 1.9 3.9 7.0
20-year U.S. Treasury bonds 2.5 4.5 8.0
30-year inflation protected Treasury (TIPS) 2.9 4.9 9.0
GNMA Mortgages 2.4 4.4 8.0
10-year tax-free municipal (A rated) 2.0 4.0 7.0
Corporate and Emerging Market Fixed Income
10-year investment-grade corporate (AAA-BBB) 2.6 4.6 9.0
20-year investment-grade corporate (AAA-BBB) 3.3 5.3 10.0
10-year high-yield corporate (BB-B)) 4.5 6.5 15.0
Foreign government bonds (unhedged) 2.6 4.6 9.0
US Equity Common Equity and REITs
US Large Stocks 5.0 7.0 19.0
US Small Cap Stocks 5.3 7.3 22.0
US Small Value Stocks 6.0 8.0 26.0
REITs (Real Estate Investment Trusts) 5.0 7.0 19.0
International Equity (unhedged)
Developed countries 5.4 7.4 19.0
Developed countries small companies 5.7 7.7 22.0
Developed countries small value companies 6.4 8.4 26.0
All emerging markets including frontier countries 7.0 9.0 29.0
*The estimate of risk is the estimated standard deviation of annual returns, according to Morningstar.

External links


  1. A Random Walk Down Wall Street - Burton Malkiel (2007), page 185 (source: Ibbotson Associates)
  2. Dividend Discount Model
  3. Rational Expectations: Asset Allocation for Investing Adults (Investing for Adults) (Volume 4) - William Bernstein (2014)
  4. Bernstein: A Decade of Super-Low Returns in Bogleheads.org forum, 9 June 2014
  5. The Four Pillars of Investing - William Bernstein (2002), page 72
  6. Portfolio Solutions’ 30-Year Market Forecast for Investment Planning (2014 edition), from Portfolio Solutions. Reprinted with permission from Rick Ferri, CEO, Portfolio Solutions.