A Closer Look at Long-term Returns

Commonfund

Research

5 Pages

Commonfund analyzes how portfolio structure, inflation, and compounding interact to shape long-term investment outcomes. The study emphasizes that maintaining real returns requires discipline through cycles and that small differences in annual performance can lead to large wealth gaps over decades.

Key Takeaways

Compounding power: A 1% increase in annual returns boosts a 30-year portfolio’s value by roughly 35%.
Inflation hurdle: Real returns for 60/40 portfolios averaged only 3.1% annually over the past 50 years after inflation.
Discipline required: Staying invested through drawdowns historically raised long-term returns by more than 150 basis points annually.
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