Historical and expected returns

From Bogleheads

Historical and expected returns provides historical market data as well as estimates of future market returns.

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%

Robert Shiller

Robert Shiller is a Professor of Economics at Yale University. He maintains multiple historical market data spreadsheets, including the following:

Aswath Damodaran

Aswath Damodaran is a Professor of Finance at New York University. He maintains various corporate finance and valuation spreadsheets, including the following:

Data prior to 1970

Forum member McQ has provided references for finding older historical data on the returns earned on stocks, bonds, and where available, other investment assets. It includes US and International data over various time frames, along with commentary on various issues related to the data.

Expected future returns

John Bogle

John Bogle with reasonable expectations for stocks and bonds over the next ten years, using his own "Occam's razor" model.[2]

Ten-Year Expected Long Term Nominal Returns (2017)[3]
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.

William Bernstein

William Bernstein with a summary of reasonable expected returns over the next ten years, derived from the dividend discount model, published in 2014. [4]

Ten-Year Expected Long Term Real Returns (2014)
Source: Rational Expectations: Asset Allocation for Investing Adults (Investing for Adults) (Volume 4)[5][6]
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:

Ten-Year Expected Long Term Real Returns (2002)
Source: The Four Pillars of Investing[7]
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.

Thirty-Year Return Estimate of Bonds, Stocks and REITs (2015)
Source: Portfolios Solutions[8]
Asset Classes Real returns Nominal returns with
2% inflation 		Risk
Estimate*
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
GNMA Mortgages 2.4 4.4 8.0
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 5.4 7.4 20.0
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.
All interest and dividends are reinvested.

See also

External links

References

  1. ↑ A Random Walk Down Wall Street - Burton Malkiel (2007), page 185 (source: Ibbotson Associates)
  2. ↑ Occam's Razor Redux: Establishing Reasonable Expectations for Financial Market Returns - John Bogle (Fall 2015)
  3. ↑ John Bogle, Bogleheads XVI!, Bogleheads XVI Presentation (Slides 64 to 65), October 19, 2017.
  4. ↑ Dividend Discount Model
  5. ↑ Rational Expectations: Asset Allocation for Investing Adults (Investing for Adults) (Volume 4) - William Bernstein (2014)
  6. ↑ Bernstein: A Decade of Super-Low Returns in Bogleheads.org forum, 9 June 2014
  7. ↑ The Four Pillars of Investing - William Bernstein (2002), page 72
  8. ↑ Portfolio Solutions’ 30-Year Market Forecast for 2015, from Portfolio Solutions. Reprinted with permission from Rick Ferri, CEO, Portfolio Solutions.
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