The Global Investment Returns Yearbook 2025, published by UBS in partnership with university professors, analyzes 125 years of financial asset performance worldwide. The document highlights the long-term outperformance of stocks… provided you are patient and accept volatility.
This is a study that Warren Buffett would likely endorse, given his famous quote: “Our preferred holding period is forever.” This rule, which the Oracle of Omaha (his birthplace in Nebraska in 1930) and CEO of Berkshire Hathaway has applied to his portfolio management for years, is also echoed in the latest edition of the Global Investment Returns Yearbook, published by UBS in partnership with several academics from the London Business School and the University of Cambridge.
Annualized stock returns: 9.7%
Based on 125 years of historical data, this study was designed to provide, according to the Swiss bank, an in-depth analysis to help investors face current challenges and inform their thinking.
The main conclusion: the long-term outperformance of stocks is undeniable. “Stocks have outperformed bonds, Treasury bills, and inflation in all the countries studied,” observes the Yearbook. A dollar invested in U.S. stocks in 1900 is worth more than 107,000 dollars today, much more than the same dollar invested in government bonds or short-term Treasury bills. The annualized return on stocks was 9.7%, compared to 4.6% for bonds and 3.4% for Treasury bills.
“Around 80% of the value of U.S. listed companies in 1900 belonged to sectors that have today partially or completely disappeared.”
According to the study, government bonds have offered an average real return (after inflation) of just 0.9% per year since 1900. Despite their reputation as a safe investment, these assets have gone through prolonged periods of very low returns, the authors note. Not to mention the negative interest rates that prevailed in Europe only a few years ago.
Desert Crossings
However, this long-term stockholding period seems very theoretical, as it assumes a transfer across several generations and an unwavering patience on the part of the shareholder. To invest in stocks, one must be prepared for volatility and long desert crossings.
After a crash, investors may have to wait a long time before recovering their investment. For example, during the Great Depression and the period from 1929 to 1945, it took no less than 15 and a half years to return to pre-crisis levels. Between 1973-1984, the oil shock and inflation caused stocks to remain below the breakeven point for more than 10 years. From 2000-2007, the bursting of the tech bubble led to a decline followed by a recovery that still took 7.5 years. Finally, from 2007 to 2013, the great financial crisis took 4 years to overcome.
Several other insights can be drawn from the study. First, the profound transformation of the markets: “Around 80% of the value of U.S. listed companies in 1900 belonged to sectors that have today partially or completely disappeared. This figure reaches 65% for the United Kingdom.” A significant proportion of today’s listed companies come from sectors that barely existed in 1900. Back then, railroads dominated the stock market capitalization in the U.S. and the U.K. (63% and 50%, respectively). In 2025, it is technology, healthcare, and renewable energy that are leading the way, accounting for 63% of the U.S. market capitalization and 44% of the U.K.
“[…] U.S. now represents 64% of global market capitalization, largely due to the outperformance of large tech stocks.”
The virtues of diversification
Another major point emphasized by UBS: the virtues of diversification to reduce risk and overcome volatility. Historically, the correlation between stocks and bonds has been low (0.33 globally, 0.19 in the U.S.). However, this truth was challenged in 2022, when both asset classes had a positive correlation and fell simultaneously. According to the Yearbook data, international diversification also helped improve the risk-return ratio. With one caveat: U.S. investors would have achieved better results by focusing on their domestic market, where returns have been the highest.
However, market concentration is becoming an increasing problem, as the famous “7 Magnificent” (Nvidia, Meta, Tesla, Amazon, Alphabet, Microsoft, and Apple) have taken a dominant role in recent years. “The global stock market was relatively balanced in 1900, but the U.S. now represents 64% of global market capitalization, largely due to the outperformance of large tech stocks. Market concentration in the U.S. is at its highest in 92 years,” the study points out.
Finally, inflation plays an important role in long-term returns. Since 1900, the average inflation rate has been 2.1% in Switzerland, the lowest in the world, and 2.9% in the U.S. A dollar from 1900 is worth about 37 dollars today. Asset returns have been lower during periods of rising interest rates and higher during easing cycles. Historically, gold and commodities have been the best hedges against inflation. However, gold’s long-term returns are low, despite its high volatility.
