Thornburg Investment Management examines how inflation, taxes, and investment expenses reduce investors’ actual wealth creation despite strong nominal returns. Using 30 years of historical data, it argues that focusing on real real returns provides a more practical framework for asset allocation, account selection, and long term planning.
A Study of Real Real Returns
Thornburg Investment Management
Research
8 Pages
Key Takeaways
Real Return Gap: U.S. large cap stocks earned a 10.80% nominal annual return but only a 5.79% real real return after inflation, taxes, and expenses over 30 years.
Stocks Led Overall: Over 30 years, U.S. large cap stocks returned 5.79%, international stocks 5.13%, while commodities lost 2.64% annually on a real real return basis.
Account Type Matters: Corporate bonds produced a 2.12% real real return in taxable accounts versus 3.75% in tax deferred accounts, highlighting the importance of asset location.
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