The following charts show the distribution of real historical returns over 1, 5, and 10 year horizons for a portfolio consisting of 60% stocks and 40% bonds.
Some facts clients might not be aware of:
- A balanced portfolio can drop as much as 35% in any given year
- Balanced portfolios have delivered negative real returns over 10 year periods 15% of the time
- Over all rolling 5 year periods, a balanced portfolio has yielded real returns ranging from -10% through +22% annualized
Chart 1. Probability of negative real returns to a 60/40 U.S. stock/bond portfolio over 1, 5 and 10 year horizons
Chart 2. Range of real returns to a U.S. 60/40 stock/bond portfolio over 1, 5, and 10 year horizons
Chart 3. Frequency distribution of real returns to U.S. 60/40 stock/bond portfolio over rolling 12 month periods
Source: Shiller, Federal Reserve
Chart 4. Frequency distribution of real returns to U.S. 60/40 stock/bond portfolio over rolling 5 year (60 month) periods
Chart 5. Frequency distribution of real returns to U.S. 60/40 stock/bond portfolio over rolling 10 year (120 month) periods.
