/ DATA & TOOLS

Stocks, Bonds and Gold Returns from 1922+

Stocks have outperformed t-bills, t-bonds, and gold over the 5, 10, 30, 40, and 50 year periods ending 2018. Stocks only underperformed gold in the prior 20-year period due to the great recession.

Period Ending 2018StocksGoldT-BondsT-Bills
5 Years50%7%16%5%
10 Years239%47%22%5%
20 Years195%339%130%43%
30 Years1,589%206%502%138%
40 Years7,434%517%1,493%462%
50 Years10,263%3,213%2,446%900%

Historical Prices of Stocks vs Bonds vs Gold

The returns of each asset class can be easily seen in the visualization below.

Which is better: Stocks, Bonds, or Gold?

Aren’t data visualizations great? We can see that if total returns are our goal, we should be holding equities over bonds and gold the majority of the time. For most investors, this includes investing in low-cost index funds as it’s challenging for most investors and traders to beat the market.

Are Bonds Less Risky Than Stocks?

In the media, you often hear than bonds are less risky than stocks. If anyone ever tells you that, steer clear of their advice because they don’t know what they’re talking about:

You cannot talk about risk without considering the investment timeline.

If we use history as a guide, a person with $100,000 and a 30-year horizon can invest in “less risky” bonds and compound their money to $602,000. If that same person invests in stocks, they will end up with $1,689,000. Whose retirement is in a less risky position?

The “bonds are less risky than stocks” mantra holds up when the timeline is shorter.

 StocksBondsT-Bills
Standard Deviation18.0%4.4%2.6%
Largest Loss-43%-5%0%
Positive Years74%92%100%

Using historical data as a guide, investors should hold stocks over the long term and reduce portfolio volatility as they draw nearer to withdrawing their investments.

There are ways to improve total returns while lowering “risk” by using leverage, combining assets, and targetting volatility. But for most retail investors, this is a bad idea.

Why Do Stocks Return More Than Bonds?

History shows that being an owner is more profitable than being a lender. Let’s think about why.

The first reason is due to risk. Debt holders always get paid before equity investors. Stockholders get what’s left after debts are satisfied. Remember the basic accounting equation:

Equity = Assets - Liabilities

Investors are well aware of this risk, and this is why there is an equity risk premium.

The second reason is due to asymmetrical payoffs. When you own debt, you can only earn as much as the coupon and interest payments. The upside is capped. When you own a business or stock, there is no cap on the potential profits you may receive.

Gold, on the other hand, isn’t a productive asset. Investors generally hold gold as protection against adverse currency movements and a hedge against inflation. It’s often inversely correlated with the stock market.

Historical Data for Stocks, Bonds & Gold

For those interested in running your own analysis, please see the below data.

Price History
StocksT-BillsT-BondsGold
Year
1929131.88106.34105.0799.81
193098.75111.18109.8599.90
193155.46113.74107.0382.54
193250.66114.96116.44100.10
193375.99116.06118.60127.38
193475.09116.44128.05167.83
1935110.18116.64133.78168.55
1936145.38116.84140.49168.70
193794.00117.19142.43168.31
1938121.53117.29148.43168.60
1939120.20117.33154.98166.52
1940107.37117.36163.35163.76
194193.66117.46160.04163.76
1942111.61117.85163.72163.76
1943139.59118.30167.79163.76
1944166.15118.75172.12163.76
1945225.67119.20178.67167.92
1946206.65119.65184.26167.92
1947217.39120.33185.95167.92
1948229.79121.56189.58167.92
1949271.85122.90198.42153.31
1950355.60124.34199.27167.97
1951439.80126.18198.68167.97
1952519.62128.29203.19167.39
1953513.35130.72211.61168.55
1954783.18131.98218.57169.52
19551038.47134.17215.65169.47
19561115.73137.60210.79169.28
1957999.05142.04225.11169.09
19581435.84144.57220.39169.81
19591608.95149.27214.56169.81
19601614.37153.82239.53170.63
19612044.40157.30244.46170.54
19621864.26161.67258.38170.44
19632285.80166.70262.74169.76
19642661.02172.54272.53169.81
19652990.97179.28274.49169.91
19662692.74187.95282.47169.96
19673333.69196.10278.01169.09
19683694.23206.41287.11187.18
19693389.77219.96272.71198.79
19703510.49234.66318.41181.13
19714009.72245.32349.57210.35
19724761.76255.01359.42309.19
19734080.44272.16372.57516.30
19743023.54293.33379.98889.45
19754142.10310.90393.68673.92
19765129.20326.35456.61647.70
19774771.20343.09462.50776.25
19785081.77366.87458.901005.47
19796022.89403.33461.982201.64
19807934.26448.58448.172878.18
19817561.16512.73484.911983.99
19829105.08569.18644.042149.49
198311138.90617.26664.651883.70
198411823.51676.60755.921548.81
198515516.60727.26950.291552.06
198618386.33771.151181.061892.74
198719455.08815.271122.472352.73
198822672.40867.861214.782024.63
198929808.58938.241429.721980.60
199028895.111009.081518.871829.51
199137631.511065.691746.771746.78
199240451.511101.981910.301619.74
199344483.331134.842181.771854.62
199445073.141180.072006.431834.98
199561838.191245.152477.551874.41
199675863.691307.682512.941785.20
1997100977.341373.762762.711396.90
1998129592.251438.703174.951410.84
1999156658.051503.582912.881366.09
2000142508.981590.233398.031327.29
2001125622.011648.633587.371337.69
200298027.821675.964129.651679.73
2003125824.391693.224145.152013.79
2004139341.421714.004331.302107.40
2005146077.851765.594455.502481.86
2006168884.341848.184542.873057.57
2007178147.201933.985006.694033.62
2008113030.221964.646013.104207.79
2009142344.871967.295344.655261.25
2010163441.941969.845796.966799.71
2011166871.561970.446726.527406.87
2012193388.431971.426926.408019.35
2013255553.311972.726295.795816.64
2014290115.421973.776972.345584.18
2015294115.791977.917061.895133.04
2016328742.281988.007110.655567.97
2017399768.642015.637309.876301.40
2018382850.002063.407308.656200.53
Return History
StocksT-BillsT-BondsGold
Year
1930-0.250.050.050.00
1931-0.440.02-0.03-0.17
1932-0.090.010.090.21
19330.500.010.020.27
1934-0.010.000.080.32
19350.470.000.040.00
19360.320.000.050.00
1937-0.350.000.01-0.00
19380.290.000.040.00
1939-0.010.000.04-0.01
1940-0.110.000.05-0.02
1941-0.130.00-0.020.00
19420.190.000.020.00
19430.250.000.020.00
19440.190.000.030.00
19450.360.000.040.03
1946-0.080.000.030.00
19470.050.010.010.00
19480.060.010.020.00
19490.180.010.05-0.09
19500.310.010.000.10
19510.240.01-0.000.00
19520.180.020.02-0.00
1953-0.010.020.040.01
19540.530.010.030.01
19550.330.02-0.01-0.00
19560.070.03-0.02-0.00
1957-0.100.030.07-0.00
19580.440.02-0.020.00
19590.120.03-0.030.00
19600.000.030.120.00
19610.270.020.02-0.00
1962-0.090.030.06-0.00
19630.230.030.02-0.00
19640.160.040.040.00
19650.120.040.010.00
1966-0.100.050.030.00
19670.240.04-0.02-0.01
19680.110.050.030.11
1969-0.080.07-0.050.06
19700.040.070.17-0.09
19710.140.050.100.16
19720.190.040.030.47
1973-0.140.070.040.67
1974-0.260.080.020.72
19750.370.060.04-0.24
19760.240.050.16-0.04
1977-0.070.050.010.20
19780.070.07-0.010.30
19790.190.100.011.19
19800.320.11-0.030.31
1981-0.050.140.08-0.31
19820.200.110.330.08
19830.220.080.03-0.12
19840.060.100.14-0.18
19850.310.070.260.00
19860.180.060.240.22
19870.060.06-0.050.24
19880.170.060.08-0.14
19890.310.080.18-0.02
1990-0.030.080.06-0.08
19910.300.060.15-0.05
19920.070.030.09-0.07
19930.100.030.140.15
19940.010.04-0.08-0.01
19950.370.060.230.02
19960.230.050.01-0.05
19970.330.050.10-0.22
19980.280.050.150.01
19990.210.05-0.08-0.03
2000-0.090.060.17-0.03
2001-0.120.040.060.01
2002-0.220.020.150.26
20030.280.010.000.20
20040.110.010.040.05
20050.050.030.030.18
20060.160.050.020.23
20070.050.050.100.32
2008-0.370.020.200.04
20090.260.00-0.110.25
20100.150.000.080.29
20110.020.000.160.09
20120.160.000.030.08
20130.320.00-0.09-0.27
20140.140.000.11-0.04
20150.010.000.01-0.08
20160.120.010.010.08
20170.220.010.030.13
2018-0.040.02-0.00-0.02

Additional Information

leo

Leo Smigel

Based in Pittsburgh, Analyzing Alpha is a blog by Leo Smigel exploring what works in the markets.