Battle of the assets: Which asset class delivers the best long-term returns?
Americans are often told to “invest for the long term,” but what exactly does that mean? Long-term investing is about focusing on goals that are still far off and ignoring short-term market gyrations that, while unsettling in the moment, are insignificant over time.
One way to decide which assets to invest in is by comparing the long-term returns of various asset classes. (Another way is by consulting with a financial advisor, who can help you select the right investments for your individual financial situation.) Returns can vary greatly over short time periods, but returns over decades tend to indicate the wealth-creation potential of certain investments.
Stocks are Americans’ favorite long-term investment, according to Bankrate’s 2025 Long-Term Investment Survey. Overall, 27 percent of Americans said the stock market was their preferred place to invest the money they won’t need for at least a decade.
Here’s a breakdown of long-term investment returns by different asset classes.
Long-term returns by asset class
| Asset | Investment | 1-year return | 3-year return | 5-year return | 10-year return | 15-year return |
| U.S. large-cap stocks | Vanguard 500 Index Fund Admiral Shares (VFIAX) | 12.2 percent | 10.0 percent | 20.3 percent | 12.8 percent | 13.4 percent |
| U.S. small-cap stocks | Vanguard Small Cap Index Fund Admiral Shares (VSMAX) | 3.9 percent | 4.0 percent | 17.2 percent | 8.3 percent | 10.6 percent |
| International developed market stocks | Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) | 8.2 percent | 6.2 percent | 13.4 percent | 5.7 percent | 6.1 percent |
| Emerging market stocks | Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX) | 13.7 percent | 3.5 percent | 9.8 percent | 4.3 percent | 3.6 percent |
| U.S. bonds | Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | 4.6 percent | 0.68 percent | -0.17 percent | 1.4 percent | 2.4 percent |
| U.S. high-yield bonds | Vanguard High-yield Corporate Fund Admiral Shares (VWEAX) | 7.8 percent | 5.2 percent | 7.5 percent | 4.6 percent | 5.8 percent |
| Gold | SPDR Gold Shares (GLD) | 38.6 percent | 15.2 percent | 13.0 percent | 9.3 percent | 6.6 percent |
| Real estate | Vanguard Real Estate Index Fund Admiral Shares (VGSLX) | 11.0 percent | -1.5 percent | 10.7 percent | 4.8 percent | 8.2 percent |
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Benefits of a diversified portfolio
As the table above shows, returns can vary significantly from one asset to the next. Consistently predicting when returns are going to be high for an asset is difficult, if not impossible, over the long term. That’s why holding a diversified portfolio makes sense for most investors.
Choosing to hold a diversified portfolio is essentially an admission that you don’t know how the future will unfold. If you did, there would be no need to diversify. Stocks typically offer high returns over the long term, but they can be quite volatile over shorter time periods. Bonds, on the other hand, haven’t offered much in the way of returns recently, but they tend to be more stable than stocks.
Diversified portfolios include a broad array of assets, which usually means you’ll have some holdings that are performing well, and others that are disappointing. The different assets balance each other out and can dampen the overall volatility of your portfolio, which may help you achieve better long-term returns.
If you’re not sure about the right asset allocation for you, consider working with a financial advisor to develop an overall financial plan. Bankrate’s financial advisor matching tool can help you find an advisor in your area.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
