Yesterday, I asked Google Gemini to provide me with the calendar year returns going back to 1966 for a very simple “Balanced” portfolio comprised of just 50% 10-year treasury bonds / 50% U.S. stocks.
The first, obvious observation, one which most of us are already well aware of, is the immense power of compounding over time. Saving and investing early and consistently can produce many multiples of your original income by the time you retire.
Another interesting, less-obvious observation is how returns over even 30-year periods can be dispersed fairly widely.
In this industry, we always refer to long periods of time because short periods are so unpredictable (primarily driven by investor emotion / sentiment), and short-term returns are not very meaningful for long-term financial goals.
We generally believe that thirty years is a long enough time horizon where volatility is stripped out so that all 30-year periods are pretty comparable with fairly reliable returns.
Turns out that isn’t the case.
Below is a graph showing the multiple of original salary over rolling 30-year periods that would have accumulated by the end of each rolling 30-year period (assuming no taxes or expenses) from the beginning of 1966 through the end of 2024.
The period from 1969 to 1998 produced the highest hypothetical portfolio value with an ending value that equaled 73x the original salary.
Specifically, if you started with $50,000 income (inflated at 3% per year) and saved 20% of your income each year for thirty years starting in 1969, the hypothetical portfolio was worth over $3.6 million by the end of 1998!
The 1979 to 2008 period produced just 38x original salary even though that period shared twenty years with the best period (1969 to 1998).
The period from 1993 to 2022 was the worst period only producing a 24.4x multiple of original salary, or only about a third of the best 30-year period.
In the worst period, the ending hypothetical portfolio value was $1.2 million instead of $3.6 million. However, even that is not too shabby with just a $50,000 annual income.
One lesson of all this is to start saving early! Let time work for you.
Another lesson is that not all 30-year periods are equal and the 30-year period in which you just happen to work, save and invest can have a significant impact on outcomes, which is obviously something we don’t have any control over.
Other interesting findings:
- The average annual return from 1966 through 2025 was about 9% with about a 10% standard deviation (highly attractive risk / return metrics) even with a “Balanced” portfolio split evenly between treasury bonds and U.S. stocks.
- The expectation for a multiple of original salary given those risk / return metrics is about 37x so there is a wide dispersion between actual and expected outcomes.
- The worst calendar year for the Balanced portfolio was an 18% decline in 2022 (both bonds and stocks lost double digits…a very rare occurrence).
- The best calendar year was 31% in 1982.
- The best 30-year period from an average annual return standpoint was 1975 to 2004 with a 12% average annual return. However, the best 30-year investment period in terms of portfolio growth was 1969 to 1998 even though the average annual return was slightly lower at 11.6%. Why? Because the sequence of returns matter! Read more about Sequence of Returns here.
- The worst 30-year period was 1993 to 2022 with an 8% average annual return, which is still great for a Balanced portfolio.
- Returns seems to have been consistently dropping over time.
Disclosures and Methodology:
Past performance is no guarantee of future results. All investments maintain risk of loss in addition to gain
Data from third-parties is believed to be reliable but accuracy is not guaranteed. Much of the data used to interpret the markets and forecast returns are often at odds with each other and can result in different conclusions.S ome data may be outdated
This is not investment advice but merely a general commentary. Individualized investment advice cannot be provided until a thorough review of your unique circumstances and financial goals is completed
Views provided here are current only as of the moment of posting and are subject to change at any time without notification,
Assumes 50% in 10-year Treasury Bonds and 50% in U.S. stock market rebalanced on the last day of each year. Assumes income grows at 3% per year and save 20% of gross income. Assumes no taxes, fees or expenses on the underlying investments.
