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Ranking Asset Classes by Historical Returns (1985-2020)

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Historical Returns by Asset Class

Historical Returns by Asset Class

Historical Returns by Asset Class (1985-2020)

Mirror, mirror, on the wall, is there one asset class to rule them all?

From stocks to bonds to alternatives, investors can choose from a wide variety of investment types. The choices can be overwhelming—leaving people to wonder if there’s one investment that consistently outperforms, or if there’s a predictable pattern of performance.

This graphic, which is inspired by and uses data from The Measure of a Plan, shows historical returns by asset class for the last 36 years.

Asset Class Returns by Year

This analysis includes assets of various types, geographies, and risk levels. It uses real total returns, meaning that they account for inflation and the reinvestment of dividends.

Here’s how the data breaks down, this time organized by asset class rather than year:

 U.S. Large Cap StocksU.S. Small Cap StocksInt'l Dev StocksEmerging StocksAll U.S. BondsHigh-Yield U.S. BondsInt'l BondsCash (T-Bill)REITGold
TickerVFIAXVSMAXVTMGXVEMAXVBTLXVWEAXVTABXVUSXXVGSLXIAU
2020*1.5%-5.5%-10.3%-0.7%4.9%-0.5%2.6%-0.7%-16.4%21.9%
201928.5%24.5%19.3%17.6%6.3%13.3%5.5%-0.1%26.1%15.9%
2018-6.2%-11.0%-16.1%-16.2%-1.9%-4.7%1.0%-0.1%-7.7%-3.2%
201719.3%13.8%23.8%28.7%1.4%4.9%0.3%-1.3%2.8%9.3%
20169.7%15.9%0.4%9.5%0.5%9.0%2.5%-1.8%6.3%6.6%
20150.6%-4.3%-0.9%-16.0%-0.3%-2.0%0.3%-0.7%1.6%-12.3%
201412.8%6.7%-6.4%-0.2%5.1%3.9%8.0%-0.7%29.3%-1.2%
201330.4%35.8%20.3%-6.4%-3.6%3.1%-0.4%-1.5%0.9%-29.0%
201214.0%16.2%16.5%16.8%2.4%12.5%4.5%-1.7%15.7%6.5%
2011-0.9%-5.5%-15.0%-21.0%4.6%4.2%0.8%-2.9%5.5%5.5%
201013.4%26.0%6.8%17.2%5.0%10.9%1.7%-1.5%26.6%26.0%
200923.3%32.7%24.9%71.5%3.2%35.6%1.6%-2.4%26.3%20.2%
2008-37.0%-36.1%-41.3%-52.8%5.1%-21.3%5.5%2.0%-37.0%5.4%
20071.3%-2.7%6.8%33.6%2.8%-1.8%0.1%0.7%-19.7%25.8%
200612.9%12.9%23.1%26.3%1.8%5.7%0.5%2.1%31.8%19.3%
20051.4%3.9%9.8%27.7%-0.9%-0.5%1.8%-0.5%8.3%13.0%
20047.3%16.2%16.5%22.1%1.0%5.2%1.8%-2.0%26.7%1.4%
200326.2%43.1%36.1%54.7%2.1%15.1%0.4%-0.9%33.3%19.2%
2002-23.9%-21.8%-17.6%-9.6%5.8%-0.6%4.2%-0.7%1.3%20.8%
2001-13.3%1.6%-23.1%-4.4%6.8%1.3%4.6%2.6%10.7%-0.4%
2000-12.0%-5.8%-17.1%-29.9%7.7%-4.1%5.4%2.5%22.2%-9.6%
199917.9%19.9%23.6%57.3%-3.4%-0.2%-0.6%2.0%-6.5%-1.7%
199826.6%-4.2%18.0%-19.4%6.9%3.9%10.2%3.5%-17.7%-2.4%
199731.0%22.5%0.0%-18.2%7.6%10.0%8.9%3.5%16.8%-23.2%
199618.9%14.3%2.6%12.1%0.3%6.0%8.3%1.9%31.4%-7.7%
199534.0%25.6%8.4%-1.9%15.3%16.2%14.3%3.1%10.0%-1.7%
1994-1.5%-3.1%4.9%-10.1%-5.2%-4.3%-7.3%1.3%0.4%-4.9%
19937.0%15.5%28.9%69.4%6.7%15.1%10.7%0.2%16.3%13.9%
19924.4%14.9%-14.7%7.8%4.1%11.0%3.3%0.6%11.2%-8.7%
199126.3%40.9%8.7%54.5%11.8%25.2%7.5%2.5%31.5%-12.5%
1990-8.9%-22.8%-27.9%-16.1%2.4%-11.3%-2.7%1.6%-20.3%-8.3%
198925.5%11.0%5.6%56.9%8.6%-2.6%-0.6%3.7%3.9%-6.8%
198811.3%19.7%22.8%33.9%2.8%8.8%4.4%2.1%8.6%-19.6%
19870.3%-12.7%19.3%9.3%-2.8%-1.7%4.5%1.3%-7.8%19.0%
198616.8%4.5%67.5%10.4%13.9%15.6%10.1%5.0%17.7%17.9%
198526.4%26.2%50.3%22.9%17.6%17.5%7.0%3.8%14.6%1.7%

*Data for 2020 is as of October 31

The top-performing asset class so far in 2020 is gold, with a return more than four times that of second-place U.S. bonds. On the other hand, real estate investment trusts (REITs) have been the worst-performing investments. Needless to say, economic shutdowns due to COVID-19 have had a devastating effect on commercial real estate.

Over time, the order is fairly random with asset classes moving up and down the ranks. For example, emerging market stocks plummeted to last place amid the global financial crisis in 2008, only to rise to the top the following year. International bonds were near the bottom of the barrel in 2017, but rose to the top during the 2018 market selloff.

There are also large swings in the returns investors can expect in any given year. While the best-performing asset class returned just 1% in 2018, it returned a whopping 71.5% in 2009.

Variation Within Asset Classes

Within individual asset classes, the range in returns can also be quite large. Here’s the minimum, maximum, and average returns for each asset class. We’ve also shown each investment’s standard deviation, which is a measure of volatility or risk.

Return Variation Within Asset Classes Over History

Although emerging market stocks have seen the highest average return, they have also seen the highest standard deviation. On the flip side, T-bills have seen returns lower than inflation since 2009, but have come with the lowest risk.

Investors should factor in risk when they are looking at the return potential of an asset class.

Variety is the Spice of Portfolios

Upon reviewing the historical returns by asset class, there’s no particular investment that has consistently outperformed. Rankings have changed over time depending on a number of economic variables.

However, having a variety of asset classes can ensure you are best positioned to take advantage of tailwinds in any particular year. For instance, bonds have a low correlation with stocks and can cushion against losses during market downturns.

If your mirror could talk, it would tell you there’s no one asset class to rule them all—but a mix of asset classes may be your best chance at success.

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Mining

How to Avoid Common Mistakes With Mining Stocks (Part 4: Project Quality)

Mining is a technical field that manages complex factors from geology to engineering. These details can make or break a project.

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Quality Mining Projects

Mining is a technical field and requires a comprehension of many complex factors.

This includes everything from the characteristics of an orebody to the actual extraction method envisioned and used—and the devil is often found in these technical details.

Part 4: Evaluating Technical Risks and Project Quality

We’ve partnered with Eclipse Gold Mining on an infographic series to show you how to avoid common mistakes when evaluating and investing in mining exploration stocks.

Here is a basic introduction to some technical and project quality characteristics to consider when looking at your next mining investment.

Mining Project Quality

View the three other parts of this series so far:

Part 4: Technical Risks and Project Quality

So what must investors evaluate when it comes to technical risks and project quality?

Let’s take a look at four different factors.

1. Grade: Reliable Hen Vs. Golden Goose

Once mining starts, studies have to be adapted to reality. A mine needs to have the flexibility and robustness to adjust pre-mine plans to the reality of execution.

A “Golden Goose” will just blunder ahead and result in failure after failure due to lack of flexibility and hoping it will one day produce a golden egg.

Many mining projects can come into operation quickly based on complex and detailed studies of a mineral deposit. However, it requires actual mining to prove these studies.

Some mining projects fail to achieve nameplate tonnes and grade once production begins. However, a team response to varying grades and conditions can still make a mine into a profitable mine or a “Reliable Hen.”

2. Money: Piggy Bank vs. Money Pit

The degree of insight into a mineral deposit and the appropriate density of data to support the understanding is what leads to a piggy bank or money pit.

Making a project decision on poor understanding of the geology and limited information leads to the money pit of just making things work.

Just like compound interest, success across many technical aspects increases revenue exponentially, but it can easily go the other way if not enough data is used to make a decision to put a project into production.

3. Environment: Responsible vs. Reckless

Not all projects are situated in an ideal landscape for mining. There are environmental and social factors to consider. A mining company that takes into account these facts has a higher chance of going into production.

Mineral deposits do not occur in convenient locations and require the disruption of the natural environment. Understanding how a mining project will impact its surroundings goes a long way to see whether the project is viable.

4. Team: Orchestra vs. One-Man Band

Mining is a complex and technical industry that relies on many skilled professionals with clear leadership, not just one person doing all the work.

Geologists, accountants, laborers, engineers, and investor relations officers are just some of the roles that a CEO or management team needs to deliver a profitable mine. A good leader will be the conductor of the varying technical teams allowing each to play their best at the right time.

Mining 101: Mining Valuation and Methods

In order to further consider a mining project’s quality, it is important to understand how the company is valued and how it plans to mine a mineral resource.

Valuation

There are two ways to look at the value of a mining project:

  1. The Discounted Cash Flow method estimates the present value of the cash that will come from a mining project over its life.
  2. In-situ Resource Value is a metric that values all the metal in the ground to give an estimate of the dollar value of those resources.

Mining Method

The location of the ore deposit and the quantity of its grade will determine what mining method a company will choose to extract the valuable ore.

  1. Open-pit mining removes valuable ore that is relatively near the surface of the Earth’s crust using power trucks and shovels to move large volumes of rock. Typically, it is a lower cost mining method, meaning lower grades of ore are economic to mine.
  2. Underground mining occurs when the ore body is too deep to mine profitably by open-pit. In other words, the quality of the orebody is high enough to cover the costs of complex engineering underneath the Earth’s crust.

When Technicals and Quality Align

This is a brief overview of where to begin a technical look at a mining project, but typically helps to form some questions for the average investor to consider.

Everything from the characteristics of an orebody to the actual extraction method will determine whether a project can deliver a healthy return to the investor.

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Mining

Volatile Returns: Commodity Investing Through Miners and Explorers

The companies that mine or explore for metals offer additional leverage to commodity prices, creating opportunities for astute investors.

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Volatile Returns: Commodity Investing Through Miners

Investors consider gold and silver as safe haven investments. But the companies that produce gold and silver often offer volatile returns, creating opportunities for astute investors.

Volatility is a double-edged sword, particularly when it comes to commodity investing. During the good times, it can create skyrocketing returns. But during bad times, it can turn ugly.

Today’s infographic comes to us from Prospector Portal, and shows how investing in precious metals equities can outperform or underperform the broader metals market.

Capitalizing on Volatility: Timing Matters

Just like most investments, timing matters with commodities.

Due to the complex production processes of commodities, unexpected demand shocks are met with slower supply responses. This, along with other factors, creates commodity supercycles—extended periods of upswings and downswings in prices.

Investors must time their investments to take advantage of this volatility, and there are multiple ways to do so.

Three Ways to Invest in Commodities

There are three primary routes investors can take when it comes to investing in commodities.

Investment MethodBenefitsLimitations
Direct physical investment
  • Purest form of exposure

  • Intrinsic value of a commodity and physical possession
  • High transaction costs (buying, shipping, transport)

  • Costs of physical storage limit the quantity and returns
Commodity futures
  • Commodity investment without the need for storage

  • Diversification benefits and inflation hedge
  • Complex and frequent transactions

  • Risk of contango—when futures contracts are more expensive than the underlying commodity
Commodity-related equities
  • Exposure to prices without storage or transaction limitations

  • Opportunity to benefit from commodity prices and company performance
  • Returns depend on the company’s valuation

  • Companies may mitigate risk by producing multiple commodities—reducing leverage to prices

Among these, commodity-related equities offer by far the most leverage to changes in prices. Let’s dive into how investors can use this leverage to their advantage with volatile metal prices.

The Fundamentals of Investing in Mining Equities

When it comes to commodity investing, targeting miners and mineral exploration companies presents fundamental benefits and drawbacks.

As metal prices rise, the performance of mining companies improves in several ways—while in deteriorating conditions, they do the opposite:

CategoryRising Commodity PricesFalling Commodity Prices
Outlook- Improved outlook- Deteriorated outlook
Stock Price Movement- Equity growth- Equity decline
Dividend Payouts- Increased dividends- Decreased dividends
Financial Performance- Increased earnings- Decreased earnings

With the right timing, these ups and downs can create explosive opportunities.

Mining companies, especially explorers, use these price swings to their advantage and often produce market-beating returns during an upswing.

But how?

The Proof: How Mining Equities React to Metal Prices

Not only do price increases translate into higher profits for mining companies, but they can also change the outlook and value of exploration companies. As a result, investing in exploration companies can be a great way to gain exposure to changing prices.

That said, these types of companies can generate greater equity returns over a shorter period of time when prices are high, but they can also turn dramatically negative when prices are low.

Below, we compare how producers and exploration companies with a NI-43-101 compliant resource perform during bull and bear markets for precious metals.

All figures are in U.S. dollars unless otherwise stated.

Mining CompanyCompany StagePrimary Metal
Produced
Market Cap.
Oct 31, 2019
Market Cap.
July 29, 2020
Bull Market Performance
(Nov. 1, 2019-July 29, 2020)
Bear Market Performance
(Jan 02 – Dec 31, 2018)
Banyan GoldExploration/
Development
Gold$6M$40M500%-44%
Renforth ResourcesExplorationGold$8M$10M11%-10%
Auryn ResourcesExplorationGold, Copper$181M$330M60%-39%
Wesdome Gold Mines Ltd.ProductionGold$1,104M$1,885M68%110%
Monarch GoldExploration/
Development
Gold$57M$148M139%-23%
Red Pine ExplorationExplorationGold$13M$22M29%-55%
Revival Gold Inc.Exploration/
Development
Gold$27M$74M113%5%
Erdene Resource DevelopmentExploration/
Development
Gold$36M$111M222%-56%
Endeavor Mining Corp.ProductionGold$2,622M$5,874M54%-13%
Yamana Gold IncProductionGold$4,572M$8,279M87%-22%

During the bear market period, the price of gold declined by 2.66%, and despite engaging in exploration activity, most companies saw a slump in their share prices.

In particular, exploration companies, or juniors, took a heavier hit, with returns averaging -31.66%. But even during a bear market, a discovery can make all the difference—as was the case for producer Wesdome Gold Mines, generating a 109.95% return over 2018.

  • Average returns for gold producers including Wesdome: 24.83%
  • Average returns for gold producers excluding Wesdome: -17.65%

During the bull market period for gold, gold mining companies outperformed the price of gold, with juniors offering the highest equity returns averaging 153.43%. Gold producers outperformed the commodity market, the value of their equities increased 69.61%—less than half of that of exploration companies.

Silver: Bears vs Bulls

Similar to gold mining companies, performances of silver producers and explorers reflected the volatility in silver prices:

CompanyCompany StagePrimary Metal
Produced
Market Cap.
Oct 31, 2019
Market Cap.
July 29, 2020
Bull Market Performance (Nov. 1, 2019-July 29, 2020)Bear Market Performance (Jan 02 – Dec 31, 2018)
Silvercrest MetalsExplorationSilver$694M$1,449M78%117%
Pan American SilverProductionSilver$2,973M$10,550M125%1%
Golden MineralsExplorationSilver$30M$80M80%-42%
Americas Gold and SilverProductionSilver$335M$482M10%-56%
Dolly Varden Silver Corp.ExplorationSilver$28M$74M152%-32%
Endeavour SilverProductionSilver, Gold$458M$837M72%-10%

During the bear market period for silver, its price decreased by 9.8%. Explorers and producers both saw a dip in their share prices, with the equity of silver producers decreasing by 21.63%.

However, the discovery of a high-quality silver deposit again made the difference for SilverCrest Metals, which generated a 116.85% return over the year.

  • Average returns for silver exploration companies including SilverCrest: 8.32%
  • Average returns for silver exploration companies excluding SilverCrest: -27.86%

On the other hand, during the bull market period, the price of silver increased by 34.33%. Silver exploration companies surpassed the performance of the price of silver.

  • Average returns for silver producers: 69.04%
  • Average returns for silver exploration companies: 95.36%

The potential to generate massive returns and losses is evident in both cases for gold and silver.

The Investment Potential of Exploration

Mining equities tend to outperform underlying commodity prices during bull markets, while underperforming during bear markets.

For mining exploration companies, these effects are even more pronounced—exploration companies are high-risk but can offer high-reward when it comes to commodity investing.

To reap the rewards of volatile returns, you have to know the risks and catch the market at the right time.

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