Asset Class Return Comparison
Direct answer: Over the past 30 years (1995-2024), U.S. equities (S&P 500) have been the top-performing major asset class with approximately 10.7% annualized returns. Bonds (Bloomberg US Agg) returned approximately 4.5%, gold approximately 7%, and REITs approximately 10.4%. Most investors significantly underperformed their own funds due to poor market timing.
Annualized returns by asset class (approximate, through 2024)
| Asset class | 10-year (~2014-2024) | 20-year (~2004-2024) | 30-year (~1994-2024) |
|---|---|---|---|
| U.S. Large Cap (S&P 500) | ~13.3% | ~10.5% | ~10.7% |
| U.S. Small Cap (Russell 2000) | ~8.0% | ~9.1% | ~9.2% |
| International Developed (MSCI EAFE) | ~5.5% | ~5.8% | ~5.9% |
| Emerging Markets (MSCI EM) | ~4.4% | ~6.8% | ~7.0% |
| U.S. Bonds (Bloomberg Agg) | ~1.8% | ~3.5% | ~4.5% |
| REITs (NAREIT All Equity) | ~8.3% | ~9.5% | ~10.4% |
| Gold | ~7.9% | ~9.1% | ~7.1% |
| Commodities (Bloomberg Commodity) | ~1.5% | ~2.3% | ~2.8% |
| Cash (3-Month T-Bill) | ~2.2% | ~2.0% | ~3.2% |
| Average Equity Fund Investor (Dalbar) | ~6-7% | ~6-7% | ~6-7% |
Source: Callan: Periodic Table of Investment Returns. Last verified: September 2026.
Frequently asked questions
Why do investors underperform the funds they invest in?
The behavioral gap (documented by Dalbar annual Quantitative Analysis of Investor Behavior) shows investors consistently earn less than the funds they invest in, typically by 1.5-4% per year. The gap arises from: buying after performance (buying high after watching others profit) and selling after losses (selling low after volatility). Investors in growth funds often buy near market peaks and sell during corrections, earning a fraction of the fund's stated return. The average equity fund investor earned approximately 6-7% over 20 years while the S&P 500 earned 10.5%.
Why have emerging markets underperformed despite strong GDP growth?
This is one of the most studied paradoxes in global investing. High GDP growth does not translate to high stock returns for several reasons: (1) stock market returns depend on per-share earnings growth, which can be diluted by high new share issuance; (2) high growth countries often have higher starting valuations; (3) corporate governance and profit retention to shareholders is often worse in EM; (4) currency depreciation erodes returns in USD terms; (5) new industries emerge that were not in the index when growth was strongest. The empirical record: high-growth economies have not systematically produced higher stock returns.
How does gold fit in a diversified portfolio?
Gold has historically served as a portfolio diversifier with near-zero long-run correlation to stocks and bonds, and positive correlation to unexpected inflation. A small gold allocation (5-10%) has historically improved risk-adjusted returns (Sharpe ratio) while slightly reducing maximum drawdowns. Gold's 7-9% annualized return over 20-30 years is comparable to bonds but with different risk characteristics. Arguments against: gold produces no income (dividends, coupons), has high carrying costs for physical ownership, and its return is driven entirely by price appreciation. Most mainstream financial plans do not include gold; those that do limit it to 5-10%.