INVESTINGBUDGETINGCOLLEGE

Average Returns on Different Investment Types

The way you invest will, and should, change over your lifetime. Some factors that most think about when investing involve your goals for invested funds, when you anticipate needing the funds, and how risky you are comfortable being based on the previous two factors.

Below, we’ll cover some average returns based on different types of investment. Keep in mind, the numbers listed are just averages which means they vary year to year and are not guaranteed. Also, inflation should be considered and investors can expect to lose purchasing power of 2% to 3% every year as a result according to NerdWallet.

Stocks

Stocks have an average return rate of 10% and have for almost 100 years, according to NerdWallet. This makes many investors hopeful they will receive a 10% return rate on their own investments. However, when you look at the return year to year it rarely falls at 10%, but instead is much higher or lower depending on the year. This is why most will suggest using funds for long-term goals for stock investments to allow time to weather the ups and downs of the market and hopefully end up with the 10% average return.

Bonds

Bonds are less risky investments than stocks and therefore offer lower average rates of return. According to Pimco, the average annual return for bonds has been around 5% since 1926. This will vary based on the duration, type, and risk levels involved.

Real estate

Real estate investments can vary drastically between residential and commercial real estate, real estate investment trusts, mutual funds or exchange-traded funds tracking the real estate sector, and more. This can also be some of the most challenging, yet rewarding ways to invest as it often requires more time than other types of investments. According to the National Council of Real Estate Investment Fiduciaries (NCREIF), return for private commercial real estate properties held for investment purposes, as well as residential and diversified real estate investments averaged returns of just over 10%.

Sources:

• https://www.nerdwallet.com/article/investing/average-stock-market-return
• https://www.pimco.com/en-us/resources/education/everything-you-need-to-know-about-bonds/
• https://www.investopedia.com/ask/answers/060415/what-average-annual-return-typical-long-term-investment-real-estate-sector.asp