Yearly Asset Class Returns Through 2023
Key take aways
- Diversification is a great way to reduce the volatility of your portfolio.
- It is hard to predict which asset class will be the winner from year to year.
How do you read the chart?
The chart presents the annual returns for 9 major investment asset classes from 2009 to 2023. A tenth box is added to represent a sample “Asset Allocation” portfolio as discussed below. Each asset class and portfolio is assigned a color. Here is a guide to the labels and what they mean:
Equity or Stocks
Large Cap is the return of the largest 500 companies by market size in the United States.
Small Cap is the return of the smallest 2,000 companies by market size of the largest 3,000 companies in the United States
DM Equity is the return of Developed Market stocks. Developed Markets in this context captures the return of 21 countries excluding the US and Canada.
EM Equity is the return of Emerging Market stocks. Emerging Markets are countries not included in the Developed Markets index.
Fixed Income or Bonds
Fixed Income tracks the return of the aggregate bond but excludes international bonds, municipals, and high-yield bonds.
High-Yield represents global bonds which are riskier in nature.
Cash is the 1-3 month US Treasury return. This is typically higher than cash stored in your bank.
Alternatives
REITs represent publicly traded Real Estate Investment Trusts mostly focused on commercial real estate properties.
Com dty stands for commodities. It includes a weighting different commodities like Energy, Grains, Industrial Materials, Precious Metals, Livestock, and a few others.
The Asset Allocation Portfolio is 55% equity, 35% Fixed Income, and 10% Alternatives.
On the far right of the table, there are two more columns that summarize the annual information. The first column, “Ann”, represents the total compound return over the time period for that asset class. The second column, “Vol”, represents the annualized volatility of that asset class.
What the chart does not say
- The chart does not make any sort of guarantee about the performance of the asset classes in the future.
- The chart only goes back to 2009 and does not represent the assets longer-term metrics. If we rewound the clock to a different time period, the boxes would change.
- These returns are not inflation adjusted.