Common stocks and municipal bonds have had the highest long-term “real” returns for taxable accounts over the last 30 years, according to an annual study by Thornburg Investment Management (Thornburg) released Monday, August 23.
The study, called “Real Real Returns,” was different, Thornburg said in a news release, because it adjusted returns for inflation, taxes and costs. For wealthy investors, these factors are particularly important because of the size of their investments and related management costs, as well as the bigger tax burden.
Over a 30-year period ending in 2009, Thornburg’s study showed inflation averaged 3.51%, and for investors in the top tax bracket, marginal Federal tax rates averaged 40%. The study used a 0.50% expense charge for all investments or asset classes, except real estate.
The study by Thornburg, based in Santa Fe, New Mexico, showed that the best performing asset class over the 30-year period was large- and small-cap U.S. stocks. Large-cap stocks returned 11.24% on a nominal basis (based on the S&P 500 Index), but once fees, taxes and inflation were introduced, the return fell to 5.21%.