Average Investment Returns By Asset Class

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What is the best investment? According to Benjamin Franklin, “an investment in knowledge pays the best interest.” While Ben was probably not referring to knowledge in the form of infographics, we think they can be pretty handy.

This infographic might be able to help you find that higher interest Ben is talking about. It shows past investment returns by asset class. What’s the average? Well, investors in blended mutual funds – which have both stocks and bonds – saw their investment grow less than 3% per year on average. This 3% benchmark stays fairly constant across any long-term period. The 10-year annualized return is 2.6%, the 20-year return is 2.5%, and the 30-year is lower still at 1.9%.

Be careful – averages above refer to mutual fund investors, not the index. What’s the difference? Investors’ returns are influenced by when they traded in and out of the mutual funds, while the index a measurement of the overall market.

Stock and bond-only investors performed no better relative to their indexes.  The average investor in stock mutual funds actually earned only 5.9% annualized over the past 10 years. Bond mutual funds earned an astonishingly low 1% annualized over the same time period. Check out the infographic to see how much more the index earned.

Why do humans perform worse than the index? Studies have shown humans can have tendencies to buy high and sell low, instead of the reverse. So timing the market is more likely to hurt you than help you in the long-term.

The average here includes professionally advised investments as well as self-advised investors, and comes from the 2014 Quantitative Analysis of Investor Behavior (QAIB) by Dalbar.


the people v the index

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Kate Lawless

Kate Lawless

Kate is fiercely dedicated to solving the retirement crisis in America and helping women tackle money issues. She was a VP in the Office of the President and Chief Operating Officer at BlackRock before leaving to Harvard, where she's currently pursuing her JD and MBA degrees.

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