Don't Let Past Returns Fool You: Ritholtz Chart

Barry Ritholtz is a Bloomberg View columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He blogs at the Big Picture and is the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.”
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Rob Arnott of Research Affiliates writes:

In a world of low bond yields and slow economic growth, historically realized 5-6% real (7-8% nominal) asset class returns may be unrealistic expectations for the future.

In other words, assets with above-average valuations may not deliver the sort of returns people came to expect before the credit crisis.

What's an investor to do?

Thankfully, we have a chart.

Using price histories to create a hierarchy of expected returns, Arnott created an interactive tool to give investors some insight into which asset classes may yield the highest returns.

As the chart shows, the highest returns come from equities in emerging markets. The lowest expected returns come from U.S. small-cap stocks and Treasuries.

Owning an assortment of asset classes is one way to ensure that something you hold is going to gain value. According to Research Affiliates, at least, shifting investments away from the U.S. should raise your expected returns during the next decade.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Barry L Ritholtz at