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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Tuesday, July 18, 2006

Asset Class Returns: 1926-2000


When looking at annual ranges of returns for asset classes historically you can better understand the risk involved in each investment. Each asset class has some risk; some more than others. If look at the peak and trough of each asset class you will see the inherant risk.

For example, small cap stocks between 1926 and 2000 had a peak of 142% and a trough of -58%. Large caps' best return was 54% and worst was -43.3%. Long-term government bonds high was 40.4% and low was -9.2%. Intermediate-term government bonds highest return was 29.1% and low was -5.1%. Finally, Treasury bills never returned higher than 14.7% and 0% return was its lowest.

From this information you can conclude that small caps have the most amount of risk because they have the largest difference between their peak and trough and so on down the list.

Investing is risk versus return and these statistics bear that out.

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