Setting the Right Expectations

Past performance is no guarantee of future results.

What’s a Good Annual Return in the Stock Market?

The average return in the U.S stock market over the past 30 years has been approximately 10%, but that amount can vary each year.

For example, in 2013 and 2019, the market experienced very good years and gained nearly 30% in each. On the other end of the spectrum, the stock market lost almost 20% in 2022 and nearly 40% in 2008.

How Often Does an “Average” Return Happen?

The short answer…almost never!

If we define an “average” annual return as 8-12%, then over the past 30 years the market has accomplished this only 3 times. (2004, 2014, and 2016).

Every other year the market has either gained or lost more than 8-12%. When you measure your returns, be sure to do so over multiple years and decades and not weeks, months, or just a single year.

Which Investments Have Performed the Best?

The annual performance of different investments is best summarized using what’s known as an asset class quilt. The quilt below ranks the best performing asset classes from top to bottom. As you will notice, the best performers in a given year are sometimes among the worst performers the following year.

U.S. Large Cap – The S&P 500 Index®
U.S. Small Cap – The Russell 2000®
International – The MSCI World ex-USA®
Emerging Markets – MSCI Emerging Markets®
Bonds – Bloomberg US Aggregate Bond Index®
High Yield – Bloomberg High Yield Bond Index®
Real Estate – FTSE EPRA Nareit Developed REIT Index
Cash – The 90-day Treasury Bill