Time In The Market - Long Term Returns from Stocks, Bonds, T-Bills
The historical performance and returns from investing in
Stocks versus Bonds and Cash and even Gold can be viewed in different ways.
The same data can be viewed over different periods of time and different
conclusions can arise.
In this article we look at the returns that would
have resulted from investing in stocks, versus bonds or cash (T-Bills) and
The data source is a
well-known reference book called "Stocks, Bonds, Bills and Inflation"
edition. The book is published annually by Morningstar. (Ibbotson SBBI
classic yearbook). This data starts with 1926. In addition we added Gold's long-term performance from www.onlygold.com.
And we added in the results for the first half of 2013.
we graphed the compounded average annual return on money invested in each of
Stocks, long-term corporate bonds, T-bills and in each year since 1926 and
left invested through to today (June 22, 2013).
data is for real (inflation-corrected) returns that shows the real return in
constant purchasing power dollars. The data source assumes a tax free
account and omits trading costs or assumes they are non-existent due to the
First we will present the
results for selected starting years in a tabular format.
|Compounded Annual Average Real Return on Investment through
June 22, 2013
Based on these years, the long-term (invested since
1990 or earlier) average annual
historical real (after inflation) return on stocks has been approximately 6%
to 7%. Looking at shorter terms such as in the 13.5 years since 2000 or the
years since the start of 2008, stocks have had poor annual returns. However
for stocks have had very strong returns since the start of 2009.
the longer term, the average annual return from corporate bonds has actually
been more volatile than that from stocks. This is because bond returns on
money invested any time around 1980 had high returns to date due to initial
high interest rates. And investments in long term bonds made in the last
decade or more and held until now have enjoyed unexpected (and temporary)
capital gains due to the drop
in interest rates.
The average annual real
return from T-Bills for money invested for long periods has been roughly in
the 1% range. The more recent figures are not long-term and have been
Gold appears to have
traditionally provided a real average annual compound return of 0 to 3%. The
more recent figures for investments held since 2000 to 2009 are not long-term and have been
higher but investments in Gold held since 2010 or 2011 have not done well.
Here is the graph of the
compounded returns for Stocks, long-term corporate bonds and T-Bills. We get
to gold momentarily.