Podcast Center
Video Center
Webcasts
Resource Center
Events
October 26, 2011 at 08:00 PM
Average returns for funds with an equal mix of stock and bond allocations have historically been “statistically equivalent” during recessions and expansions, according to a Vanguard report released in early October that focused on balanced funds’ historical performance from 1926 through June 2009. The reason for this performance record, Vanguard says, is that during a recession, bonds typically outperform stocks as investors search for safety, while stock prices tend to fall in the period before a recession is declared and rise again as the economy begins to recover.
Consequently, the average returns for balanced funds between 1926 and 2009 have been “similar regardless of whether the U.S. economy was in or out of recession,” the fund giant explains. This is particularly true of inflation-adjusted or real returns, the paper notes, because inflation tends to be higher during expansions.
The research found that balanced funds rose an average of roughly 7.8 percent in recessions and 9.9 percent in expansions. After adjusting for inflation, the results were about 5.3 percent and 5.6 percent, respectively.
