Returns before and after Inflation 1926-2000
Comparing the returns of different asset classes both before and after inflation is helpful in understanding why it is so important to consider inflation when making long-term investment decisions.

This image illustrates the compound annual returns of three asset classes before and after considering the effects of inflation. Over the past 75 years, inflation has dramatically reduced the returns of stocks, bonds, and cash.

The blue, yellow, and green bars represent the nominal, or unadjusted, returns of each asset class. Nominal returns do not consider inflation. It is often the rate of return that you might think of when discussing the returns on investments.

The purple bars illustrate the real, or inflation-adjusted, returns of each asset class. Real returns reflect purchasing power. For example, if you invested in cash equivalents in 1926, the money you earned over the period provided you with very little purchasing power today.

Notice that cash and bonds, after adjusting for inflation, barely kept pace with the rise in prices over the past 75 years.

Note: The data assumes reinvestment of income and does not account for taxes or transaction costs. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest. Stocks are not guaranteed and have been more volatile than the other asset classes. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Source: Stocks-Standard & Poor's 500?, which is an unmanaged group of securities and is considered to be representative of the stock market in general; Bonds-20-year U.S. Government Bond; Cash-U.S. 30-day Treasury Bill; Inflation-Consumer Price Index.