Historical Real Investment Returns by Asset Class and Country

Are you looking for the historical return for equities, corporate bonds and short term government treasury bills?

I thought I’d share a useful set of average historical annual returns for these three major asset classes, by country.

The historical data covers the period from 1900 – 2013, encompassing many historic economic events such as two world wars and two depressions.

Each percentage represents the real return, i.e. inflation-adjusted return. This is why several of the data points are negative. The underlying return of those asset class failed to keep up with inflation.

The source of this data is the Credit Suisse Global Investment Returns Yearbook 2013.

Historical Real Investment Returns

Historical Real Investment Returns by Asset Class and Country

Key regions:

Here is the average annual return of equities, bonds and bills in the largest financial powerhouses of the world:

Worldwide

Real return of equities: 5.2%

Real return of bonds: 1.8%

Real return of bills: 0.9%

United States

Real return of equities: 6.5%

Real return of bonds: 1.9%

Real return of bills: 0.9%

Japan

Real return of equities: 4.1%

Real return of bonds: (0.9%)

Real return of bills: (1.9%)

United Kingdom

Real return of equities: 5.3%

Real return of bonds: 1.4%

Real return of bills: 0.9%

The historical returns of other domestic equity markets:

Here are the average annual returns of the remaining countries in the dataset.

Australia

Real return of equities: 7.4%

Real return of bonds: 1.5%

Real return of bills: 0.7%

Austria

Real return of equities: 0.7%

Real return of bonds: (4.1%)

Real return of bills: (8.1%)

Belgium 

Real return of equities: 2.6%

Real return of bonds: 0.2%

Real return of bills: (0.3%)

Canada

Real return of equities: 5.7%

Real return of bonds: 2.1%

Real return of bills: 1.5%

Denmark

Real return of equities: 5.2%

Real return of bonds: 3.1%

Real return of bills: 2.1%

Finland

Real return of equities: 5.8% 

Real return of bonds: 0%

Real return of bills: (0.5%)

France

Real return of equities: 3.2%

Real return of bonds: 0%

Real return of bills: (2.8%)

Germany

Real return of equities: 3.2%

Real return of bonds: (1.6%)

Real return of bills: (2.4%)

Ireland

Real return of equities: 4.1%

Real return of bonds: 1.4%

Real return of bills: 0.7%

Italy

Real return of equities: 1.9% 

Real return of bonds: (1.5%)

Real return of bills: (3.6%)

Netherlands

Real return of equities: 4.9% 

Real return of bonds: 1.5%

Real return of bills: 0.6%

New Zealand

Real return of equities: 6% 

Real return of bonds: 2%

Real return of bills: 2.7%

Norway

Real return of equities: 4.3% 

Real return of bonds: 1.8%

Real return of bills: 1.1%

Portugal

Real return of equities: 3.7%

Real return of bonds: 0.6%

Real return of bills: (1.1%)

South Africa

Real return of equities: 7.4%

Real return of bonds: 1.8%

Real return of bills: 1.0%

Spain

Real return of equities: 3.6%

Real return of bonds: 1.4%

Real return of bills: 0.3%

Sweden

Real return of equities: 5.8%

Real return of bonds: 2.6%

Real return of bills: 1.9%

Switzerland

Real return of equities: 4.4%

Real return of bonds: 2.2%

Real return of bills: 1.9%

Analysis of historical returns by asset class

When reviewing this data, I had several observations about the distribution of returns across the asset classes. Please leave a comment below to share your thoughts on these historical returns.

Historical returns show that inflation has not been evenly spread

The returns on treasury bills are close to those of an instant access savings account. They’re very low, and compete with inflation to provide even a positive return.

Yet, some countries (such as Germany) have seen bills lose 2% per year for 113 years, whereas others (such as Switzerland) have seen 1.9% gains over the same period.

This isn’t because of the credit worthiness (i.e. risk) of the bills themselves. This damage has been caused by the unequal ravaging of inflation.

Germany is a good example, as it was battered by hyperinflation during the 1920s. This eroded the value of cash so massively that the effect of these years being included in the index will have had a significant impact on the annual average, despite the stability of Germany’s currency for the decades of peace after the wars concluded.

The historical returns of some stock markets have been disappointing

The highest return from equities is the US (6.5%) whereas the lowest is Austria (0.9%). This is a staggering spread of returns, and points to a ‘geographical lottery’.

Many things went well for the US economy over the 20th century. It escaped the worst of the world wars, it rapidly industrialised, and became home to the tech titans which now hold valuations exceeding a trillion dollars.

The large size of the US domestic market provides a global competitive edge to US companies, who are able to achieve great economies of scale before they expand abroad.

In contrast, some smaller countries didn’t manage to incubate any corporations which would grow to become global titans, and therefore any local investors who only bought shares in their nations’ companies will have been starved of the opportunity to buy a Google or a Vodafone.

What we should learn from these historical real investment returns is that our equity allocations should be globally diversified, to ensure that we do not lose this geographical lottery.

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