All charts and data on this site are CPI-U inflation-adjusted and with dividends reinvested. (Why?)

Total Real Returns

Asset Classes: Stocks vs. Bonds vs. Cash

1987-08-03? to 2022-08-10 Trendline Overall
Return
Worst
Drawdown
Current
Drawdown
VFINX ×   Vanguard 500 Index Fund Investor Shares
Mutual Fund
+6.63%/yr
(R2=0.870)
+954.8%
+6.96%/yr
−58.6%
2009-03-09
−16.2%
VBMFX ×   Vanguard Total Bond Market Index Fund Investor Shares
Mutual Fund
+3.03%/yr
(R2=0.931)
+134.9%
+2.47%/yr
−25.1%
2022-06-14
−22.5%
USDOLLAR ×   United States Dollar
Currency
−2.35%/yr
(R2=0.985)
−61.5%
−2.69%/yr
−61.5%
2022-08-08
−61.5%


Understanding the Total Real Returns chart

The goal of investing is to preserve and ideally grow wealth, deferring some consumption today to provide for future consumption later. The Total Real Returns chart demonstrates this more clearly than conventional (nominal-dollar, price-only) stock charts, because:

  1. we include the effects of inflation-diminished purchasing power, and
  2. we include the effects of reinvesting dividends from the initial investment.

The y-axis is labeled Purchasing Power (2022 USD), and it represents what economists call inflation-adjusted or constant dollars. It has been adjusted for inflation using the monthly Consumer Price Index data published by the U.S. Bureau of Labor Statistics. However, it might be simpler to understand the y-axis if we labeled it Baguettes. 🥖

Consider the red line, VFINX. At the left side of the chart, on 1987-08-03, suppose we bought 1 Baguettes worth of VFINX, reinvesting dividends over the years. On the right side of the chart on 2022-08-10, that investment would today be able to buy you much more: 10.55 Baguettes.

In contrast, consider the green line, USDOLLAR, which represents paper dollar bills, or a zero-interest checking account. If on 1987-08-03 you put 1 Baguettes worth of cash into a checking account, today on 2022-08-10 you could now use this cash to buy only 0.3848 Baguettes.

The relative growth or decline indicates how successfully one could have used each of these assets to store wealth on 1987-08-03 to be consumed later on 2022-08-10. In the case of VFINX, you'd have +954.8% Baguettes over the time period shown, while if you held cash (USDOLLAR), you'd have −61.5% Baguettes.

In more technical terms, we're trying to explain the potential confusion between real dollars (the y-axis), and nominal dollars (the USDOLLAR asset).


Understanding the Total Real Drawdowns chart

The Total Real Drawdowns chart shows the decrease in purchasing power relative to that asset's most recent peak. When the asset is setting new all-time highs (in inflation-adjusted, dividend-reinvested terms), the drawdown will be 0%.

Drawdowns measure the perceived level of pain and loss to the investor, as an investor often compares against their peak asset or portfolio value. This is a way of visualizing historical risk and volatility.


Why these specific assets?

On this page, we are only displaying VFINX for stocks and VBMFX for bonds because these are older mutual funds with lots of historical data available. They are probably not the funds you should consider buying today, for many reasons, including:

There are more considerations and we are not recommending any funds or securities.

We highly recommend the Bogleheads Wiki as an outstanding educational resource to get started in self-serve investing. The Bogleheads Forum is an excellent community to ask your questions.


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Bonds: Treasuries vs. Corporates (VFITX,VFICX) Treasuries: Short vs. Intermediate vs. Long-Term (VFISX,VFITX,VUSTX) Corporates: Short vs. Intermediate vs. Long-Term (VFSTX,VFICX,VWESX)

Balanced: Growth vs. Moderate Growth vs. Conservative Growth vs. Income (VASGX,VSMGX,VSCGX,VASIX)

Tilt: Growth vs. Dividend Appreciation vs. High Dividend Yield (VUG,VIG,VYM) Low Volatility vs. High Beta (SPLV,SPHB)

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Company Size: Small-Cap vs. Mid-Cap vs. Large-Cap (VSMAX,VIMAX,VLCAX)

International: US vs. World vs. Ex-US (VTI,VT,VXUS) Emerging vs. Developed Markets (VEMAX,VTMGX)

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