Average Historical Returns
This article reviews the average historical returns used in Income Lab.
Last published on: February 11, 2026
Income Lab allows you to choose to use "Historical" analysis method for your plan. Historical analysis uses historical return and inflation sequences as a model of asset class and inflation behavior. It is useful, therefore, to have some idea of the average historical returns and standard deviations of inflation, asset classes, and blended portfolios.
The data below reflect historical averages for all available periods through the end of 2024. These values will be updated annually. Note that not all asset classes have representative indices available through all of history. When necessary, the closest available asset class with longer history is used for periods when an asset class with more limited history is not available (e.g., US Large Cap stock in the place of US Large Cap Value stock).
Also, please note that the actual overall average returns and standard deviations across all of the sequences of returns and inflation included in a particular "Historical" analysis will differ from those shown below and depend on plan length and any "economic context" that is applied to the plan.
Inflation
History contains periods of high, middling, and low inflation as well as periods of deflation. Average monthly and annualized inflation for all available history through the end of 2024 is shown in the table below.
| Monthly | Annualized | Ā |
| Inflation Rate | 0.18% | 2.19% |
| Std Dev of Inflation | 1.02% | 3.52% |
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Asset Class Returns
| Asset Class | Avg NomĀ Ret | Nom Std Dev | Avg RealĀ Ret | Real Std Dev |
| US All Cap | 10.7% | 15.9% | 8.5% | 16.4% |
| US All Cap Gr | 10.6% | 16.6% | 8.4% | 17.1% |
| US All Cap Val | 10.7% | 15.7% | 8.4% | 16.2% |
| US Large Cap | 10.8% | 16.3% | 8.5% | 16.8% |
| US Large Cap Gr | 10.7% | 17.0% | 8.5% | 17.5% |
| US Large Cap Val | 10.6% | 16.2% | 8.4% | 16.7% |
| US Mid Cap | 11.1% | 16.7% | 8.9% | 17.1% |
| US Mid Cap Gr | 10.9% | 17.7% | 8.6% | 18.1% |
| US Mid Cap Val | 11.4% | 16.4% | 9.2% | 16.9% |
| US Small Cap | 12.5% | 22.9% | 10.3% | 23.3% |
| US Small Cap Gr | 10.7% | 18.8% | 8.5% | 19.2% |
| US Small Cap Val | 11.7% | 17.3% | 9.4% | 17.7% |
| Int'l Dev Stock | 7.9% | 11.5% | 5.7% | 12.0% |
| Emerging MktĀ Stock | 9.0% | 13.4% | 6.9% | 13.9% |
| US Agg Bonds | 4.5% | 3.6% | 2.4% | 5.1% |
| US Gov't Bonds (Long) | 4.8% | 7.0% | 2.7% | 7.9% |
| US Gov't Bonds (Int) | 4.4% | 3.5% | 2.3% | 5.0% |
| US Gov't Bonds (Short) | 4.4% | 1.6% | 2.2% | 3.8% |
| US Muni Bonds | 4.4% | 4.2% | 2.3% | 5.6% |
| US CorpĀ Bonds | 5.0% | 5.4% | 2.9% | 6.5% |
| US High Yld Bonds | 6.0% | 8.2% | 3.9% | 9.1% |
| US Cash Equiv | 3.9% | 0.8% | 1.8% | 3.6% |
| US REITs | 11.6% | 22.0% | 9.4% | 22.4% |
| Commodities | 3.8% | 12.6% | 1.6% | 12.8% |
Blended Returns
To help give context to these historical returns, the following show average annualized nominal and real returns and standard deviations of some basic blended portfolios for all available periods through the end of 2024. These correspond to the following default blended portfolios, available through the allocation slider in the investment portfolios section of the Income Lab app.
Example Portfolios
| Asset Class | Conservative | Moderate/Conservative | Moderate | Moderate/Aggressive | Aggressive |
| US All Cap Stock | 10% | 30% | 50% | 60% | 70% |
| Int'l Developed Stock | 0% | 5% | 10% | 15% | 20% |
| US Gov't Long Bonds | 35% | 25% | 15% | 10% | 4% |
| US Gov't Int Bonds | 55% | 40% | 25% | 15% | 6% |
| Portfolio | Avg NomĀ Ret | Nom StdĀ Dev | Avg RealĀ Ret | Real Std Dev |
| Conservative | 5.2% | 4.6% | 3.1% | 5.9% |
| Moderate/Conservative | 6.6% | 6.1% | 4.4% | 7.2% |
| Moderate | 7.9% | 8.9% | 5.8% | 9.7% |
| Moderate/Aggressive | 8.7% | 10.7% | 6.5% | 11.3% |
| Aggressive | 9.5% | 12.5% | 7.3% | 13.1% |
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A Note on Annualization, Averaging, and Rounding
In some examples above, due to rounding, annualization, and how averages are calculated, you may find that the difference between nominal and real return averages doesn't seem to line up with average inflation. Averages above are calculated from historical monthly nominal returns, historical monthly inflation, and historical monthly real returns. In other words, nominal returns are averaged, inflation is averaged, and real returns are averaged. These returns are then annualized and rounded.
Real averages are not calculated from the nominal return and inflation averages. Because inflation varies through time, this means the average real and nominal return will not typically relate to each other as N = R x I or R = N / I. The example below shows how averaging actual per-period nominal and real returns, not always line up with producing real averages from average nominal returns and inflation.
| Nominal Return | Inflation | Real Return | Ā |
| Period 1 | 14% | 5% | 8.5714% |
| Period 2 | -5% | 3% | -7.767% |
| Period 3 | 9% | 4% | 4.8077% |
| Average | 6% | 4% | 1.87% |
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In this example, the average real return is not 6% - 4% = 2% or 1.06 / 1.04 - 1 = 1.92%, although these are reasonable approximations. Because the actual inflation in each period varies, the true average periodic real return is 1.87%.
ā ļø Important Note
If you are using a historical analysis method or tool - for asset classes where we don't have full history, we use the next closest asset class to model before that asset class/index is available (e.g., for small cap growth, we'd use small cap before small cap growth is available, then all cap before that).
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