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Financial Planning -> Stocks, Bonds etc. -> Investment Returns

Historical Investment Returns on Stocks, Bonds, T-Bills

The Canadian Consumer Price Index has been quite stable since 1992.  In the 30 years from 1963 to 1992, the average annual increase (inflation rate) was 5.7%.  During that time, there were 5 years where the inflation rate was over 10%, including 1981, when the rate was 12.4%.  1981 is also the year when Canadian 5 year mortgage rates were over 21% for a couple of months.  The average 5 year mortgage rate from 1963 to 1992 was 11.03%.

Historical before-tax returns on $1,000 invested in stock markets and other investments
to December 31, 2015

Type of Investment 1 year 5 years 10 years 20 years Since
Dec 31, 1979
36 years
50 years Since
Dec 31, 1949
66 years
Avg
Annual
Return
Value Avg
Annual
Return
Value Avg
Annual
Return
Value Avg
Annual
Return
Value Avg
Annual
Return
Value Avg
Annual
Return
Value Avg
Annual
Return
Value
Cdn 3 month T-bills 0.5% $1,005 0.9% $1,043 1.6% $1,168 2.6% $1,673 5.8% $7,496 6.0% $18,473 5.2% $28,002
Cdn Govt Bonds 1 to 3 year 0.5% $1,005 1.0% $1,053 1.9% $1,204 3.1% $1,843 6.1% $8,504 6.4% $22,098 5.7% $38,274
Cdn Govt Bonds over 10 years 2.0% $1,020 2.6% $1,136 3.3% $1,385 4.5% $2,414 7.2% $12,252 7.4% $35,589 6.6% $68,871
S&P/TSX (Cdn) Composite Total Return Index (formerly TSE300 Total Return) (3) -8.3% $917 2.3% $1,122 4.4% $1,538 7.6% $4,353 8.6% $19,687 n/a n/a n/a n/a
Nikkei 225 TRI © Nikkei Inc. in Cdn$ (2) 29.4% $1,294 13.7% $1,903 4.9% $1,610 0.2% $1,036 6.6% $10,041 n/a n/a n/a n/a
S&P 500 (US) Index in Cdn$ 21.0% $1,210 20.3% $2,515 9.2% $2,403 8.2% $4,866 12.0% $59,960 10.2% $130,739 11.7% $1,492,096
European stocks in Cdn$ 16.5% $1,165 11.6% $1,733 5.8% $1,751 6.9% $3,778 10.9% $41,318 n/a n/a n/a n/a
Emerging markets stocks in Cdn$ (1) 1.9% $1,019 2.1% $1,107 5.7% $1,748 5.5% $2,917 n/a n/a n/a n/a n/a n/a
Canadian Consumer Price Index All Items 1.6% $1,016 1.5% $1,077 1.6% $1,175 1.9% $1,445 3.2% $3,162 4.1% $7,527 3.6% $10,381

Value is the value at the end of the period, of $1,000 Cdn invested at the beginning of the period.
n/a = not available

The column for returns since December 31, 1979 reflects the earliest data we have for the Nikkei 225 Index.

* Note that the average annual return on bonds is the average yield if the bonds are held to maturity.

(1)  For Emerging Markets, the earliest data that we have is December 31, 1987.  The average annual return in Canadian dollars for emerging markets for the 28 years from 1987 to 2015 is 10.7%.  $1,000 invested at the end of 1987 would have a value of $17,121 Canadian at the end of 2015.

(2)  The Nikkei 225 Total Return Index (TRI) year end factors in yen are used with the permission of Nikkei Inc. to calculate the above results.  Recent Nikkei year end factors are available on the Nikkei website.  The earliest data that we have is December 1979, when the Nikkei 225 TRI was started.  The average annual return in yen for the Nikkei 225 TRI for the 36 years from 1979 to 2015 is 4.2% (6.6% when converted to Cdn$).  1,000 yen invested at the end of 1979 would have a value of 4,339 yen at the end of 2015.  $1,000 Cdn invested at the end of 1979 would have a value of $10,041 at the end of 2015.

(3)  The S&P/TSX Composite Index Total Return data is from Libra Investment Management Inc., sourced from the Canadian Institute of Actuaries.

Exchange Rate and Above Returns

The change in the Canadian dollar has had a significant effect on some of the above results.  As an example, see the following 1 year results in US$:

S&P 500 1.4% $1,014
European stocks -2.3% $977
Emerging markets stocks    -14.6% $854

The 2015 1 year return for the Nikkei 225 TRI © Nikkei Inc. in yen is 11.0%.

Other sources of data used to calculate the above returns:
Bank of Canada Rates and Statistics - Interest Rates for T-bills and bonds, Standard & Poor's, Statistics Canada Consumer Price Index, Yahoo, Morgan Stanley, UBC Pacific Exchange Rate Service.
The returns are the total returns with dividends or interest reinvested.
All values and returns are in Canadian $.

Taxation of Interest vs Dividends vs Capital Gains

The above table shows before-tax returns.  The big difference between the returns on the S&P 500 and bonds or T-bills becomes even bigger after tax.  The interest is 100% taxable every year.  Most of the return on the S&P 500 stocks would be capital gains, which is only 50% taxable, and is not taxable until the investment is sold.  The dividends from the S&P/TSX index stocks are normally eligible for the enhanced dividend tax credit for Canadian stocks, which results in a very low tax rate.  See our article on tax treatment of income from different types of investments.

Recommended Stocks

See our article on recommended stocks for registered or non-registered accounts - these suggested portfolios are good for novice investors.

Tip:  Calculate your own investment returns using our Investment Return Calculator.

 

Revised: April 10, 2016

 

 

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