Bond Index Returns vs. Stock Index Returns 1980-2021 (2024)

FAQs

What is the average return on stocks vs bonds? ›

What is the average rate of return on stocks and bonds? The 95-year average rate of return on stocks, as measured by the S&P 500, with reinvested dividends is 9.80%. During that same period, Baa corporate bonds returned an average of 6.68% and 10-year US Treasury bonds delivered an average 4.57% return.

Over the past 30 years, stocks posted an average annual return of 10.4%, and bonds 6.8%.

While a stock market index is a weighted average made up from the prices of selected stocks, a bond index is made up from the prices of selected bonds, which are a lot more fluid and often harder to value than equities.

Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns. By owning a mix of different investments, you're diversifying your portfolio.

Myth #1: Stocks are too risky.

U.S. stocks have consistently earned more than bonds over the long term. In fact, stocks have returned an average of 11.1% each year for the last 50 years, while bonds returned 6.6% and short‐term investments returned 4.3%.

If you purchase a 10-year Treasury at time of writing, you could expect a yield of about 4.45%. Based on yields over the past 20 years, you can expect average interest payments of between 3% and 4%.

40 Years (1982 – 2022): 11.6% annual return. 30 Years (1992 – 2022): 9.64% annual return. 20 Years (2002 – 2022): 8.14% annual return.

They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.

The bond market is a wide field, with many different categories of assets. In general, you can expect a return of between 4% and 5% if you invest in this market, but it will range based on what you purchase and how long you hold those assets.

What does a bond index tell you? ›

A bond index represents the value of a portion of the bond market. Bond indices are used as a measure of performance of that portion of the bond market, and is useful as an indication of market returns and as a benchmark against which the performance of a bond strategie can be assessed.

Historically, bonds have generated stronger risk-adjusted returns compared to stocks in the three years following Federal Reserve tightening cycles. After the past seven tightening cycles, bonds delivered 89% of the return of stocks with only 26% of the volatility with more consistency in their range of outcomes.

The U.S. stock market has long been considered the source of the greatest returns for investors, outperforming all other types of investments including financial securities, real estate, commodities, and art collectibles over the past century.

Stocks have historically delivered higher returns than bonds because there is a greater risk that, if the company fails, all of the stockholders' investment will be lost (unlike bondholders who might recoup fully or partially the principal of their lending).

General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.

Bonds can lose market value if interest rates rise after they are purchased, though the full face value will be paid if securities are held to maturity. Bonds underperform stocks over the long term. Inflation can reduce or eliminate the real rate of return on bonds.

The bond market is a wide field, with many different categories of assets. In general, you can expect a return of between 4% and 5% if you invest in this market, but it will range based on what you purchase and how long you hold those assets.