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Investment Returns by Asset Class (1985 to 2022)

getToTheChopin 4y ago
This analysis covers historical investment returns by asset class (from 1985 to 2022) for a wide set of investments — including stocks / bonds in the U.S., Canada, and beyond. Some insights on 2022: * All 12 of the tracked asset classes declined in 2022 (on a real total return basis) * The biggest driver of these losses was red-hot inflation — with roughly 7% inflation over the year — spurring stern central bank responses via interest rate hikes * An investment in cash (through U.S. T-bills) was the top performing asset of 2022. However, the real total return was still a decline of 5.2% * Real estate (through REITs) was the worst investment of 2022, with a loss of 31.1%. Higher mortgage rates and commercial real estate vacancies drove the significant decline * 2022 saw stocks and bonds drop hand-in-hand by roughly 20% (in most cases), much to the despair to traditional 60/40 investors * Canadian stocks offered relative respite for investors, declining by “only” 11.9% Other insights: * 11 out of 12 of the asset classes have been a top performer in at least 1 year on record (high yield US bonds being the odd man out). On the flip side, 9 out of 12 of the asset classes have been the worst performer at some stage (Canadian stocks, Canadian bonds, and high yield US bonds being the only assets to avoid the dishonour) * It’s interesting to see how “US large cap stocks” have performed relative to “All US Bonds” over time. While stocks were down in the years of 1990, 2000-2002, and 2008, bonds actually made gains in those years — this provided valuable portfolio protection to investors who were diversified * However, this inverse relationship broke down in 2022, with stocks and bonds both suffering heavy losses. This meant that a typical 60/40 portfolio fared poorly in 2022 * Over the whole period of the analysis (1985 to 2022), the best asset classes were: U.S. large cap stocks (+8.0% per year), emerging market stocks (+7.3% per year), and US small cap stocks (+7.3% per year)
nimzoLarsen 4y ago
I find the “single asset class deep dive” section has good metrics. For Canadian stocks, the range of returns over 10 year periods has been 2.7% to 11% per year —- ie, no losses over that holding period. For emerging market stocks however, there were periods where a 10 or 15 year period wasn’t enough to eliminate losses. You needed to hold for 20 years to not lose money. It’s an interesting way to look at volatility of different asset classes.

This analysis covers historical investment returns by asset class (from 1985 to 2022) for a wide set of investments — including stocks / bonds in the U.S., Canada, and beyond. Some insights on 2022: * All 12 of the tracked asset classes declined in 2022 (on a real total return basis) * The biggest driver of these losses was red-hot inflation — with roughly 7% inflation over the year — spurring stern central bank responses via interest rate hikes * An investment in cash (through U.S. T-bills) was the top performing asset of 2022. However, the real total return was still a decline of 5.2% * Real estate (through REITs) was the worst investment of 2022, with a loss of 31.1%. Higher mortgage rates and commercial real estate vacancies drove the significant decline * 2022 saw stocks and bonds drop hand-in-hand by roughly 20% (in most cases), much to the despair to traditional 60/40 investors * Canadian stocks offered relative respite for investors, declining by “only” 11.9% Other insights: * 11 out of 12 of the asset classes have been a top performer in at least 1 year on record (high yield US bonds being the odd man out). On the flip side, 9 out of 12 of the asset classes have been the worst performer at some stage (Canadian stocks, Canadian bonds, and high yield US bonds being the only assets to avoid the dishonour) * It’s interesting to see how “US large cap stocks” have performed relative to “All US Bonds” over time. While stocks were down in the years of 1990, 2000-2002, and 2008, bonds actually made gains in those years — this provided valuable portfolio protection to investors who were diversified * However, this inverse relationship broke down in 2022, with stocks and bonds both suffering heavy losses. This meant that a typical 60/40 portfolio fared poorly in 2022 * Over the whole period of the analysis (1985 to 2022), the best asset classes were: U.S. large cap stocks (+8.0% per year), emerging market stocks (+7.3% per year), and US small cap stocks (+7.3% per year)

nimzoLarsen 4y ago

I find the “single asset class deep dive” section has good metrics. For Canadian stocks, the range of returns over 10 year periods has been 2.7% to 11% per year —- ie, no losses over that holding period. For emerging market stocks however, there were periods where a 10 or 15 year period wasn’t enough to eliminate losses. You needed to hold for 20 years to not lose money. It’s an interesting way to look at volatility of different asset classes.