Stocks vs. Bonds: Historical Returns and Key Differences

Here's a detailed look at historical data going back to 1972 for stocks and bonds.

By Lyle Daly – Updated Jul 14, 2026 at 10:47 AM EST | Fact-checked by Frank Bass

Key Points

Stocks historically outperform bonds but carry more volatility.
Bonds provide steady income and can stabilize investment portfolios.
Diversifying with both assets helps balance returns and risks.

Stocks and bonds have traditionally been the foundational elements of investment portfolios, with their allocation determined by an investor's age and risk tolerance. Historical data on stocks vs. bonds show that stocks have a clear performance edge, but bonds are far less volatile.

In other words, stocks are better for building wealth, while bonds are useful for protecting wealth. For most investors, it makes sense to hold both, and understanding how these two assets compare can help with deciding on the right mix.

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Stocks have outpaced bonds over every long-run period

The S&P 500 had a compound annual growth rate (CAGR) of 11.20% from 1972 to 2024, according to research by Robert Shiller at Yale. The 10-year Treasury yield was 3.28% from 2000 to 2024 and 4.21% in 2024, according to the Federal Reserve Bank of St. Louis.

To clarify, yield and total return are different performance metrics. Yield is the annual coupon payment on a bond, while the total bond return includes both that yield and any price changes. Bond prices normally fall when interest rates rise, and vice versa, so total bond returns can be negative during periods of rate hikes.

Although the average stock market return has been much higher than the average bond return, there have been periods when bonds have outperformed. The table below compares decade-by-decade returns for the S&P 500 with the 10-year Treasury average yield, the rate the U.S. government pays on bonds it issues.

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Data source: Robert Shiller/Yale, FRED/Federal Reserve Bank of St. Louis (2026). 10-year Treasury average provides yield only, total bond returns vary.

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Stocks and bonds generate returns in different ways

Since a stock is an ownership stake in a company, the company's performance and earnings growth largely determine its returns. Total stock returns include price appreciation and dividends, both of which contribute to stocks outperforming bonds overall.

Bonds, on the other hand, are a loan to the bond issuer. Their returns primarily come from fixed coupon payments at the rate set when the bond was issued, as well as any price changes in the bond, which are most common when interest rates shift.

While average stock returns run higher than those of bonds, stocks are also much more volatile. From 1972 to 2024, the standard deviation of the S&P 500 was 16.9%, according to research by Robert Shiller at Yale. Bond returns have a standard deviation of about 5% to 7% in most time periods, based on an analysis of the Bloomberg U.S. Aggregate Bond Index.

This difference in volatility means that bonds are typically the more stable asset, although there have been periods where they've fallen sharply. The most notable recent example was 2022, when the Fed raised rates aggressively, pushing down bond prices and causing Bloomberg's U.S. bond index to post a 13.01% loss.

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Bonds have historically moved the other way when stocks fell

The primary case for holding bonds in a portfolio is their role in reducing risk and their greater stability during bear markets, especially compared to how stocks perform in downturns. Between 2000 and 2023, stocks and bonds have had an average correlation of -0.29, according to research on U.S. market data in the Financial Analysts Journal. This negative correlation indicates that the two assets tend to move in opposite directions.

Holding bonds can help limit losses during periods of market volatility. However, the negative correlation between stocks and bonds is also largely dependent on the rate environment and not permanent. Stocks and bonds had a positive correlation in 2022, with both falling together as the market declined and interest rates soared.

Bonds have traditionally worked better as a source of passive income. The 10-year Treasury average yield was 4.29% in 2025, according to the Federal Reserve Bank of St. Louis. The S&P 500's dividend yield is about 1% as of July 2026, so for income-oriented investors, the current high-rate environment favors bonds and bond ETFs. In fairness, stock dividends can grow, as many companies increase their dividends. That's a benefit you don't get from bonds, since bond income is fixed.

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What the long-run record suggests about holding stocks vs. bonds

Long-term return records over every multi-decade period favor stocks over bonds, and by a fairly wide margin. Individual stock returns vary, but for investors who want their stock portfolio to follow the broader market, the best S&P 500 index funds are an easy way to get returns in line with the market average.

Bonds have two notable advantages, though. Their year-to-year swings tend to be lower, and high interest rates in recent years have made bonds a better source of passive income than stocks. Learning how to invest in bonds could make sense for investors looking to hedge against stock market downturns or get stable, predictable interest payments.

It's worth noting that hedging with bonds against downturns isn't always effective. When the source of a downturn is rising interest rates, bonds and stocks can both decline simultaneously. Still, a reasonable bond allocation can normally smooth out periods of market volatility, with the tradeoff being lower returns over the long haul.

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About the Author

Lyle Daly is a contributing Motley Fool stock market analyst covering information technology and cryptocurrency. Lyle has been a contributor at the financial services company since 2018. His work has been featured on USA Today, Yahoo Finance, MSN, Fox Business, and Nasdaq. Before joining The Motley Fool, he wrote for financial brands including Intuit.

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