At this time of year everyone is focused on last year’s asset returns. Let’s take a step back – a really big step back – and see what the long-term picture looks like.
Ninety-seven years of returns
Going back 97 years, this is what the annual returns were (1928-2024):
Asset Annual Return
Stocks +9.94%
Small caps +11.74%
Bonds +4.50%
Cash +3.31%
Real estate +4.23%
Gold +5.12%
Inflation +3%
This is culled from a list put together annually by Aswath Damodaran at New York University. It measures returns for stocks (S&P 500), bonds (10-year Treasuries), cash (3-month T-bills), real estate, and gold. The annual inflation rate over this period was about 3%.
Stocks win over the long run
Stocks are the clear winner over the long-term, and small cap stocks even better.
Of course, what is not shown on this list is bitcoin, where an annual return of 100%-plus is the expected norm (notwithstanding volatility).
Take the long view
What the above list shows is that investing for the long-term has merit.
Earning 10% a year is not too shabby. $1,000 invested in the S&P 500 five decades ago would be worth about $117,000 today.
Earning 100% a year (on BTC) is even better – though this is clearly not sustainable.
The lesson here is – take the long view.
