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Visualizing 90 Years of Stock and Bond Portfolio Performance

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Visualizing 90 Years of Stock and Bond Portfolio Performance

Visualizing 90 Years of Stock and Bond Portfolio Performance

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Last year, stock and bond returns tumbled after the Federal Reserve hiked interest rates at the fastest speed in 40 years. It was the first time in decades that both asset classes posted negative annual investment returns in tandem.

Over four decades, this has happened 2.4% of the time across any 12-month rolling period.

To look at how various stock and bond asset allocations have performed over history—and their broader correlations—the above graphic charts their best, worst, and average returns, using data from Vanguard.

How Has Asset Allocation Impacted Returns?

Based on data between 1926 and 2019, the table below looks at the spectrum of market returns of different asset allocations:

Stock / Bond
Portfolio Allocation
Best Annual ReturnWorst Annual ReturnAverage Annual Return
0% / 100% 32.6%-8.1%5.3%
10% / 90% 31.2%-8.2%6.0%
20% / 80%29.8%-10.1%6.6%
30% / 70%28.4%-14.2%7.2%
40% / 60%27.9%-18.4%7.8%
50% / 50%32.3%-22.5%8.3%
60% / 40%36.7%-26.6%8.8%
70% / 30%41.1%-30.7%9.2%
80% / 20%45.4%-34.9%9.6%
90% / 10%49.8%-39.0%10.0%
100% / 0%54.2%-43.1%10.3%

We can see that a portfolio made entirely of stocks returned 10.3% on average, the highest across all asset allocations. Of course, this came with wider return variance, hitting an annual low of -43% and a high of 54%.

A traditional 60/40 portfolio—which has lost its luster in recent years as low interest rates have led to lower bond returns—saw an average historical return of 8.8%. As interest rates have climbed in recent years, this may widen its appeal once again as bond returns may rise.

Meanwhile, a 100% bond portfolio averaged 5.3% in annual returns over the period. Bonds typically serve as a hedge against portfolio losses thanks to their typically negative historical correlation to stocks.

A Closer Look at Historical Correlations

To understand how 2022 was an outlier in terms of asset correlations we can look at the graphic below:

The last time stocks and bonds moved together in a negative direction was in 1969. At the time, inflation was accelerating and the Fed was hiking interest rates to cool rising costs. In fact, historically, when inflation surges, stocks and bonds have often moved in similar directions.

Underscoring this divergence is real interest rate volatility. When real interest rates are a driving force in the market, as we have seen in the last year, it hurts both stock and bond returns. This is because higher interest rates can reduce the future cash flows of these investments.

Adding another layer is the level of risk appetite among investors. When the economic outlook is uncertain and interest rate volatility is high, investors are more likely to take risk off their portfolios and demand higher returns for taking on higher risk. This can push down equity and bond prices.

On the other hand, if the economic outlook is positive, investors may be willing to take on more risk, in turn potentially boosting equity prices.

Current Investment Returns in Context

Today, financial markets are seeing sharp swings as the ripple effects of higher interest rates are sinking in.

For investors, historical data provides insight on long-term asset allocation trends. Over the last century, cycles of high interest rates have come and gone. Both equity and bond investment returns have been resilient for investors who stay the course.

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Investor Education

Ranked: The Best Stock Brokers for Investors and Traders

Whether you’re searching for low fees or an easy-to-use trading platform, this clear breakdown can help you find the best stock brokers.

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A heat map scoring the best stock brokers on a variety of categories like research and education; most of the category names and broker names are obscured from view in this preview image.

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The following content is sponsored by StockBrokers.com

Ranked: The Best Stock Brokers for Investors and Traders

Choosing the right online trading platform might seem tricky. There are lots of options, and finding the best stock brokers could require a lot of time and research. Luckily, a team of experts has already done the work for you!

In this graphic from StockBrokers.com, we show how stock brokers performed in a variety of categories so you can make an informed decision.

Breaking Down the Best Stock Brokers

StockBrokers.com analyzed 17 select brokers using actual trading accounts or demo accounts. 

The below table shows the overall scores, with 100% being the highest possible score. It also breaks down ratings in the ease of use, mobile trading, and commissions and fees categories, which have the heaviest weightings in the overall score. 

Stock BrokerOverall Ease
of Use
Mobile
Trading
Commissions
& Fees
Fidelity9910099100
E*TRADE971009990
Charles Schwab971009790
Merrill Edge941009690
Interactive Brokers93809990
Firstrade88809490
tastytrade85908990
Ally Invest85907990
Webull85909190
Robinhood841009090
TradeStation82709090
J.P. Morgan
Self-Directed
Investing
82857990
Vanguard78955690
Tradier77907590
eToro77858790
SoFi Invest74906490
Public.com70856890

Source: StockBrokers.com as of January 23, 2024. The overall score is based on the following category weightings: 25% ease of use, 25% mobile trading apps, 20% Commissions and fees, 10% investment options, 10% research, 5% platforms and tools, 5% education.

Fidelity has the top overall score in 2024, with an excellent app, clear navigation, and low fees. When it comes to fees, Fidelity skips many charges that are common among other brokers. It also doesn’t accept payment for order flow, which is when brokers direct your orders to market centers that pay them a referral fee. 

E*TRADE and Charles Schwab are tied for second place when it comes to the best stock brokers. According to StockBrokers.com, E*TRADE has the best platform for mobile trading. The company offers one app focused on casual investors, and another for beginner to intermediate investors that has a useful—but not overwhelming—number of tools. 

Charles Schwab, on the other hand, boasts the best desktop trading platform where investors can keep track of huge watch lists and follow streaming market news.

How Brokers Bring Additional Value

Apart from giving you the ability to trade stocks online, brokers also offer other perks like trading tools and education. Here’s how the same 17 brokers scored on these types of features.

Stock BrokerInvestment
Options
Research Platform
& Tools
Education
Fidelity969694100
E*TRADE95999396
Charles Schwab971009595
Merrill Edge89989399
Interactive Brokers999910093
Firstrade90877569
tastytrade80559284
Ally Invest89777382
Webull76638858
Robinhood74496273
TradeStation94659170
J.P. Morgan
Self-Directed
Investing
78755791
Vanguard88674868
Tradier76467335
eToro54566653
SoFi Invest60415486
Public.com53444653

Source: StockBrokers.com as of January 23, 2024. The overall score is based on the following category weightings: 25% ease of use, 25% mobile trading apps, 20% Commissions and fees, 10% investment options, 10% research, 5% platforms and tools, 5% education.

Interactive Brokers holds the title of “best for professional traders” thanks to its wide range of highly customizable tools, investment options, and research. Investors can also trade in foreign markets and hold multiple currencies, for those interested in forex trading.

While not included in overall scores, StockBrokers.com also rated brokers on their customer service through nationwide phone testing. Fidelity and Merrill Edge are the best stock brokers when it comes to customer service. Both companies answered calls in less than a minute on average, and their representatives had high professionalism. 

Picking the Best Brokerage Account

When you’re choosing from a list of the best stock brokers, you’ll want to consider which features are most important to you.

StockBrokers.com offers clear, in-depth reviews and compares brokers on more than 150 different account features and fees. You can also see screenshots of what various pages look like within the trading platforms. 

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See StockBrokers.com’s guide to the best online trading platforms of 2024.

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