Rolling Real Returns: Stocks, Bonds and Bills since 1928

View fullsize

Revisited the Stock, Bonds and Bills data from my previous post, I created a set of real (inflation adjusted) average annual compound returns for rolling time periods (e.g. rolling 5-year returns: 1928-1933, 1929-1934, 1930-1935 etc...) I also included the  average annual compound real return for 1928-2012: stocks 6.0% 10-year bonds 2.0% and 3-month bills 0.5%

Some of the outliers in these returns are due to bubbles. For example stocks in the late 1920s, mid-1930s and late-1990s had unusual large real returns with a corresponding drop. See Long-term Growth Rate of US Stocks)

Return Data from Damodaran Online | Updated Data | Historical Returns on Stock Bonds and Bills - United States CPI from Measuring Worth. 

Chart created using OmniGraphSketcher; labels added with Adobe Illustrator. 

Annual Returns of Stock, Bond, and Bills since 1928

View fullsize

Here is a simple graph comparing the variation of annual returns for US stocks, US 10-year bonds and US 3-month t-bills. I have included both nominal returns (not adjusted for inflation) and real returns. 

Stocks are of course the most risky of the three with both the highest and the lowest  returns then comes 10-year bonds and finally t-bills with the smallest but the most consistant returns. However, after 3-month t-bills are adjusted for inflation there are many years you will "lose" money. And in years with deflation, your real return will be larger than the nominal return (i.e. you did better holding stocks in 1933 when you take into account the effects of deflation in that year while 1954 had the highest nominal stock return).

Return Data from Damodaran Online | Updated Data | Historical Returns on Stock Bonds and Bills - United States CPI form Measuring Worth. 

Chart created using OmniGraphSketcher; labels added with Adobe Illustrator.