Historical and expected returns
Historical and expected returns provides historical market data as well as estimates of future market returns.
Burton Malkiel, author of A Random Walk Down Wall Street provides historic asset class returns.
|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%|
Robert Shiller is a Professor of Economics at Yale University. He maintains multiple historical market data spreadsheets, including the following:
Aswath Damodaran is a Professor of Finance at New York University. He maintains various corporate finance and valuation spreadsheets, including the following:
Expected future returns
|Asset Class||Expected Nominal Return|
|U.S. Stocks (broad market)||4%|
|U.S. Bonds (broad market + moderate risk)||3.1%|
Note: Bonds expected return assumes accepting moderate additional credit risk and significant interest rate risk vs. the U.S. Treasury 10-year note.
|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%|
|Precious Metals Stocks||1%|
|Base Metals and Oil Stocks||3%|
|Treasury Bills, Notes, and Bonds||-1%|
Bernstein's estimates in 2002 are below:
|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%|
|High-Yield ("Junk") Bonds||5%|
|Investment-Grade Corporate Bonds; TIPS||3.5%|
|Treasury Bills and Notes||0-2%|
|Precious Metals Equity||3%|
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.
|Asset Classes||Before Inflation
|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)||2.6||4.6||9.0|
|10-year tax-free municipal (A rated)||1.6||3.6||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))||4.0||6.0||15.0|
|Foreign government bonds (unhedged)||2.4||4.4||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||5.8||7.8||26.0|
|US Real Estate Investment Trusts (REITs)||4.8||6.8||19.0|
|International Equity (unhedged)|
|Developed countries small companies||5.7||7.7||23.0|
|Developed countries small value companies||6.2||8.2||27.0|
|All emerging markets including frontier countries||7.0||9.0||29.0|
|*The estimate of risk is the estimated standard deviation of annual returns.
The 30-year forecast data is presented on an annualized compounded total return basis.
- Google spreadsheet to calculate an estimated expected return for an entire portfolio.
- Vanguard’s economic and investment outlook contains Vanguard's expected 10-year returns for major asset classes. December 2015.
- Expected Returns on Major Asset Classes from the CFA Institute, Anti Ilmanen, June 2012, Vol. 2012, No. 1.
- A Random Walk Down Wall Street - Burton Malkiel (2007), page 185 (source: Ibbotson Associates)
- Occam's Razor Redux: Establishing Reasonable Expectations for Financial Market Returns - John Bogle (Fall 2015)
- John Bogle, Bogleheads XVI!, Bogleheads XVI Presentation (Slides 64 to 65), October 19, 2017.
- Dividend Discount Model
- Rational Expectations: Asset Allocation for Investing Adults (Investing for Adults) (Volume 4) - William Bernstein (2014)
- Bernstein: A Decade of Super-Low Returns in Bogleheads.org forum, 9 June 2014
- The Four Pillars of Investing - William Bernstein (2002), page 72
- Portfolio Solutions’ 30-Year Market Forecast for 2015, from Portfolio Solutions. Reprinted with permission from Rick Ferri, CEO, Portfolio Solutions.