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Historical and Expected Returns

Page history last edited by blbarnitz 1 yr ago

 

Creation date 04/29/08

Contents 

  1. Historic Returns
    1. Burton Malkiel 
  2. Expected Future Returns
    1. William Bernstein
    2. Rick Ferri

 

Historic Returns

 

Burton Malkiel[1] 

historic (nominal) returns 1926-2005, source: Ibbotson Associates

  Geometric Aritmetic Standard
Series Mean Mean 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%

 

Expected Future Returns

William Bernstein[2]

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[3]

    Real With 3%  
    Returns Inflation Risk
Government Backed Fixed Income
  US Treasury Bills (1 year maturity) 0.5 3.5 1.5
  Intermediate-term US Treasury Notes 1.5 4.5 4.8
  Long-term US Treasury Bonds 2.0 5.0 5.3
  GNMA Mortgages 2.0 5.0 8.0
  Intermediate Tax-free (AA Rated) 1.0 4.0 5.0
Corporate and Emerging Market Fixed
  Intermediate High Grade Corporate 2.0 5.0 5.5
  Long-term Investment Grade Bonds 2.8 5.8 8.5
  Preferred Stocks (Rated A or better) 3.5 6.5 9.0
  High Yield Corporate (B to BB) 4.0 7.0 15.0
  Emerging Market Bonds 4.0 7.0 15.0
US Equity
  US Large Stocks 5.0 8.0 15.0
  US Small Cap Stocks 6.0 9.0 20.0
  US Small Value Stocks 7.0 10.0 22.0
  REITs (Real Estate Investment Trusts) 5.0 8.0 14.0
International Equity
  International Developed Country Stocks 5.0 8.0 17.0
  International Small Country Stocks 6.0 9.0 22.0
  International Emerging Country Stocks 7.0 10.0 25.0
  Gross Domestic Product 3.5 6.5 2.0

 

 

 

Footnotes

  1. A Random Walk Down Wall Street - Burton Malkiel (2007), page 185 (source: Ibbotson Associates) ▲
  2. The Four Pillars of Investing - William Bernstein (2002), page 72 ▲
  3. 30 Year Market Forecast - Portfolios Solutions LLC (2006). Reprinted with permission from Rick Ferri, CEO, Portfolio Solutions ▲

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