# Which Investment Yields a Higher Long-Term ROI? Stocks, Bonds, Real Estate and Cash Compared

From 1928 to 2025, US stocks returned about 10% a year, corporate bonds 6.6%, Treasury bonds 4.5% and home prices 4.2%. What that means for $10,000, with the math.

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- **Canonical URL:** https://dothecalculation.com/blog/finance/which-investment-has-the-highest-long-term-roi
- **Category:** Finance
- **Author:** Do The Calculation Team
- **Published:** 2026-10-07
- **Reading time:** 13 min read
- **Publisher:** Do The Calculation (https://dothecalculation.com)
- **Methodology:** https://dothecalculation.com/methodology

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If you are investing for 10, 20 or 30 years, the question that matters most is which kind of investment has paid back the most over long periods, and at what risk. The answer is not just the biggest number in a table. It depends on time, on how much the value swings along the way, on fees and taxes, and above all on compounding.

This guide compares the long-run returns of the main asset classes using nearly a century of US data, shows how to calculate ROI and annualized return yourself, and works through what different rates do to the same $10,000. It is general education, not personal advice, and past returns do not guarantee future ones.

In this guide:

- Long-term returns by investment type, 1928 to 2025
- How to calculate ROI and annualized ROI (CAGR)
- What compounding does over 10, 20, 30 and 40 years
- Risk: the bad years that come with the higher return
- Inflation, fees and taxes, and how they shrink the result
- Practice problems and common mistakes

## Quick Answer

Over long periods, a broad US stock index has delivered the highest return of the major asset classes. From 1928 to 2025 the S&P 500, with dividends reinvested, grew about 10.0% a year on a compound basis. Corporate bonds returned about 6.6%, 10-year Treasury bonds 4.5%, US home prices 4.2% and 3-month Treasury bills 3.4%, while inflation averaged roughly 3%. The trade-off is risk: stocks lost money in about one year in four.

_[Figure: Average annual return, 1928 to 2025 (compound, before inflation) - Geometric average: the steady yearly rate that turns the starting value into the ending value.]_

**Long-term returns compared**
| Investment | Compound annual return, 1928 to 2025 | Risk | Typical horizon |
| --- | --- | --- | --- |
| US stocks (S&P 500 index fund) | 10.0% | High swings; 26 of 98 years were negative | 10+ years |
| Corporate bonds (Baa) | 6.6% | Moderate; default and interest-rate risk | 5 to 30 years |
| Gold | 5.6% | Very high swings, no income | Any |
| US Treasury bonds (10-year) | 4.5% | Low credit risk, but prices fall when rates rise | 1 to 30 years |
| US home prices | 4.2% | Moderate; illiquid and costly to buy and sell | 5+ years |
| Treasury bills / cash | 3.4% | Very low; barely beats inflation | Short term |

> **Key insight**: A few percentage points a year turn into a very large gap over decades. At the historical rates above, $10,000 grows to about $175,000 in stocks over 30 years, but only about $27,000 in Treasury bills.

## What Is ROI?

**Return on investment**

```
ROI = (Final value − Cost) ÷ Cost × 100
```
- Example: you invest $10,000 and it grows to $13,000. ROI = ($13,000 − $10,000) ÷ $10,000 × 100 = 30%.

**Key terms**
| Term | Meaning |
| --- | --- |
| ROI | Total gain as a percentage of what you put in, over the whole holding period |
| Annualized ROI (CAGR) | The steady yearly rate that gives the same total result |
| Compounding | Earning returns on earlier returns, not just on the original amount |
| Real return | Return after inflation: roughly nominal return minus inflation |
| Rule of 72 | Years to double ≈ 72 ÷ annual return in percent |

ROI on its own ignores time. A 50% ROI over 2 years and a 50% ROI over 10 years are very different results. That is why long-term comparisons use annualized return. The [ROI calculation guide](/blog/business/roi-calculation) covers both measures in more depth.

## How to Calculate ROI, Step by Step

- Step 1: Find the cost (what you put in). Example: $10,000.
- Step 2: Find the final value, including dividends or rent received. Example: $15,000.
- Step 3: Net profit = $15,000 − $10,000 = $5,000.
- Step 4: ROI = $5,000 ÷ $10,000 × 100 = 50%.

### Worked example 1: a stock

You buy shares for $5,000 and sell them for $7,500. Net profit $2,500; ROI = $2,500 ÷ $5,000 × 100 = 50%.

### Worked example 2: a property

You buy a property for $200,000 and sell it for $250,000. On price alone, ROI = $50,000 ÷ $200,000 × 100 = 25%. In practice you would also subtract buying and selling costs, repairs and taxes, and add any rent you collected, which can change the answer a lot. The [rental property ROI calculator](/calculators/rental-property-roi-calculator) includes those items.

### Worked example 3: annualized ROI (CAGR)

**Compound annual growth rate**

```
CAGR = (Final value ÷ Starting value)^(1 ÷ years) − 1
```
- Example: $10,000 grows to $20,000 in 7 years. CAGR = 2^(1/7) − 1 = 1.1041 − 1 = 10.41% a year.

Tool: [Use the ROI Calculator](https://dothecalculation.com/calculators/roi-calculator): Enter what you invested and what you got back to see total ROI and the annualized rate.

## The Power of Compounding

**Future value with compound growth**

```
FV = PV × (1 + r)ⁿ
```
- PV = starting amount, r = annual return as a decimal, n = years.
- Example: $10,000 at 10% for 30 years = $10,000 × 1.10³⁰ = $10,000 × 17.449 = $174,494.

_[Figure: Growth of $10,000 at four steady rates (US$ thousands) - The lines start together and separate faster and faster: most of the growth comes in the later years.]_

**Total ROI at steady annual rates**
| Annual return | 10 years | 20 years | 30 years |
| --- | --- | --- | --- |
| 10% | 159% | 573% | 1,645% |
| 6% | 79% | 221% | 474% |
| 4% | 48% | 119% | 224% |
| 3% | 34% | 81% | 143% |

_[Figure: $10,000 after 30 years at each asset class's historical rate - Each bar applies the 1928 to 2025 compound return for 30 years. The last bar is what you would need just to keep up with inflation.]_

Try your own numbers with the [compound interest calculator](/calculators/compound-interest-calculator), or see how the formula works line by line in the [compound interest guide](/blog/finance/compound-interest-deep-dive).

## Risk: What the Higher Return Costs You

Higher long-run returns come with bigger short-run losses. In the same 1928 to 2025 data, the S&P 500 lost 43.8% in 1931 and 36.6% in 2008, and gained 52.6% in 1954. Over 10-year stretches it lost money only 5 times out of 89, and over every 20-year stretch it made money. Time does not remove risk, but it gives good years the chance to outweigh bad ones.

_[Figure: Stocks vs Treasury bills: return and the ride, 1928 to 2025]_

**Return, risk and access to your money**
| Investment | Return | Risk | Liquidity |
| --- | --- | --- | --- |
| Stock index funds | High | High in the short run | High: sell any trading day |
| Individual stocks | Varies widely | Higher: one company can fail | High |
| Rental property | Moderate to high, with rent | Moderate; leverage magnifies gains and losses | Low: months to sell |
| REITs | Moderate to high | Similar to stocks | High |
| Corporate bonds | Moderate | Low to moderate | Moderate |
| Treasury bonds | Low to moderate | Low credit risk | High |
| Savings accounts | Low | Lowest (insured up to limits) | Highest |
| Cryptocurrency | No long history | Very high | High |

Most long-term investors hold a mix rather than one asset, so a fall in one part is softened by the others. The [portfolio diversification guide](/blog/finance/investment-portfolio-diversification) shows how to split money between stocks, bonds and cash.

## What About Real Estate?

US home prices rose about 4.2% a year from 1928 to 2025, a little above inflation. That number leaves out rent. A landlord's total return is price growth plus net rent after repairs, insurance, taxes, vacancies and management, and a mortgage multiplies the result in both directions. Some rental properties beat the stock market and some lose money, so each one needs its own numbers. The [Airbnb ROI guide](/blog/property/airbnb-roi-guide) walks through cap rate and cash-on-cash return for a short-term rental.

## Inflation, Fees and Taxes

The returns above are before inflation. With prices rising about 3% a year, stocks' 10.0% is roughly a 7% real return, and Treasury bills' 3.4% is close to zero. In today's money, $10,000 in stocks for 30 years buys about what $70,000 buys now, not $175,000. The [inflation and savings guide](/blog/finance/inflation-impact-savings) explains real returns in more detail.

_[Figure: What a fee does to $10,000 over 30 years at a 10% return - The fee is taken every year, so it compounds against you.]_

Taxes work the same way. Gains held in a taxable account are taxed when you sell, and dividends and interest are taxed each year, while tax-advantaged retirement accounts let the full return compound. The [capital gains calculator](/calculators/capital-gains-calculator) estimates the tax on a sale.

## Real-World Examples

### Example 1: index fund vs savings account, $10,000 for 30 years

**Same money, different rate**
| Investment | Rate | Final value | ROI |
| --- | --- | --- | --- |
| Stock index fund | 10% | $174,494 | 1,645% |
| Savings account | 3% | $24,273 | 143% |

The difference is $150,221. Savings rates vary: in September 2026 the FDIC's national average savings rate was 0.37%, while the best online accounts paid several times that. A savings account is still the right home for an emergency fund, because its value does not fall.

### Example 2: starting early vs starting late, $10,000 at 10%

**One deposit, left to grow until 65**
| Start age | Years | Value at 65 |
| --- | --- | --- |
| 25 | 40 | $452,593 |
| 35 | 30 | $174,494 |
| 45 | 20 | $67,275 |

Starting at 25 instead of 35 adds $278,099 from the same $10,000, because the extra ten years come at the end, when the balance is largest.

### Example 3: $500 a month at 10%, compounded monthly

_[Figure: Money you put in vs what it grew to - $500 a month at a 10% annual return, compounded monthly.]_

Tool: [Use the Investment Calculator](https://dothecalculation.com/calculators/investment-calculator): Project a starting amount plus monthly contributions at any rate and time horizon.

## Practice Problems (With Answers)

**Try these**
| Problem | Working | Answer |
| --- | --- | --- |
| 1. $5,000 grows to $8,000. ROI? | ($8,000 − $5,000) ÷ $5,000 × 100 | 60% |
| 2. $20,000 at 8% for 20 years. Final value? | $20,000 × 1.08²⁰ = $20,000 × 4.661 | $93,219 |
| 3. An investment doubles in 9 years. Annualized ROI? | 2^(1/9) − 1 | 8.01% |
| 4. $50,000 becomes $75,000 in 5 years. Annualized ROI? | 1.5^(1/5) − 1 | 8.45% |
| 5. Rule of 72: years to double at 6%? | 72 ÷ 6 | 12 years |

The [CAGR calculator](/calculators/cagr-calculator) checks problems 3 and 4. Powers like 1.08²⁰ are where a calculator earns its keep; the guide on [how calculators arrive at the answer](/blog/math/how-calculators-arrive-at-the-answer) explains how it works them out.

## Common Investment ROI Mistakes

**Mistakes and fixes**
| Mistake | Fix |
| --- | --- |
| Comparing total ROI over different time periods | Compare annualized returns (CAGR) instead |
| Ignoring fees | Subtract the annual fee from the return before projecting |
| Forgetting inflation | Use real returns (about nominal minus 3%) for long plans |
| Chasing last year's best performer | Look at decades of data, not one year |
| Selling in a downturn | Match the investment to your time horizon so you are not forced to sell |
| Putting everything in one asset | Diversify across asset classes |
| Ignoring taxes | Use tax-advantaged accounts where you can |
| Leaving out income | Include dividends, interest and rent in the final value |

## Frequently Asked Questions

**Which investment has the highest long-term ROI?**

Historically, a broad US stock index. From 1928 to 2025 the S&P 500 returned about 10.0% a year with dividends reinvested, ahead of corporate bonds (6.6%), Treasury bonds (4.5%), home prices (4.2%) and Treasury bills (3.4%).

**How do I calculate ROI?**

ROI = (final value − cost) ÷ cost × 100. For a yearly rate, use CAGR = (final ÷ start)^(1 ÷ years) − 1.

**What is a good long-term ROI?**

Anything that beats inflation by a clear margin after fees and taxes. Over the long run, stocks have beaten inflation by about 7 points a year and Treasury bonds by about 1.5.

**What is the Rule of 72?**

Divide 72 by the annual return in percent to estimate how many years it takes to double. At 6% that is 12 years; at 10%, about 7.2 years.

**Should I invest in index funds or real estate?**

They suit different needs. Index funds are cheap, diversified and easy to sell. Property can add rental income and use a mortgage, but takes time, money and effort to manage and is slow to sell. Many people hold both.

**What is the difference between ROI and CAGR?**

ROI is the total gain over the whole period. CAGR is the steady yearly rate that produces that same total, which makes investments held for different lengths of time comparable.

## Final Summary

- Long-run compound returns, 1928 to 2025: stocks 10.0%, corporate bonds 6.6%, Treasury bonds 4.5%, home prices 4.2%, Treasury bills 3.4%.
- ROI = (final − cost) ÷ cost × 100; CAGR = (final ÷ start)^(1/years) − 1.
- Compounding means most growth comes late, so time matters as much as the rate.
- Higher returns come with deeper losses along the way; match risk to your time horizon.
- Inflation, fees and taxes all compound too: check the real, after-cost return.

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_Source: [Do The Calculation](https://dothecalculation.com/blog/finance/which-investment-has-the-highest-long-term-roi). Quote freely with attribution and a link to this page._