Stocks are still king for long-term investing, Deutsche Bank says

If you’re investing for the long haul, history shows stocks will deliver the win.

Over the past 200 years, equities have delivered real returns of 4.9% per year, according to Deutsche Bank’s long-term asset return study, which analyzed data from 56 economies dating back to the 1800s. A traditional 60/40 portfolio came close at 4.2%, while government bonds returned 2.6%, and gold (GC=F) — often touted as a safe haven — lagged far behind at just 0.4%.

“History shows that investors have been consistently rewarded for taking risk and compounding the dividends and coupons available in equities and bonds,” Deutsche Bank analysts Jim Reid and Galina Pozdnyakova wrote.

But before rushing to load up on stocks, the report notes another key factor to consider: Starting valuations.

Markets that look cheap tend to deliver strong long-term gains, while those starting from rich valuations often underperform. Over the past 70 years, portfolios built from low-valuation stocks outperformed high-valuation ones by nearly 9 percentage points annually.

The US market has been an exception lately, delivering world-beating returns despite expensive valuations. But Deutsche Bank’s researchers caution, “It is the exception, not the norm, internationally and historically.” The S&P 500 (^GSPC) has rallied 17% in 2025.

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Economic growth, population trends, and even inflation policies all play critical roles in returns. The report found that nominal GDP growth — the combination of real growth and inflation — is the single “long-term anchor for asset returns.”

Over the last century, global GDP grew at an average of 5.7% a year, supporting strong equity and bond performance. Sweden and the US have led the pack in equity performance during that time, returning 7.5% and 7.2% per year, respectively.

By contrast, Italy has seen the weakest long-term equity performance in the sample, delivering just 2.5% annual real returns amid decades of political instability and slow economic growth.

However, global GDP is fading. In developed markets, nominal GDP has dropped to levels last seen in the 19th century. The result, per Deutsche, is that by the end of 2024, 25-year real equity returns in advanced economies had fallen to their lowest in more than a century.

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Moreover, slower population growth and weak productivity gains could mean the next century won’t look as generous as the last. Thirty-two countries are expected to decline in their working-age population, while 21 could face an overall population shrinkage by 2050, Deutsche notes.

For bond investors, the firm notes that starting yields matter. Historically, when 10-year bonds fall below 3%, long-term returns tend to turn negative. That’s a warning sign given that much of Europe’s government debt still trades around those levels — and US yields, while higher, are expected to drift lower as the Federal Reserve cuts rates.

Meanwhile, gold’s recent run may not be as shiny as it seems. While it’s returned 7.45% per year since 2000, the metal’s long-term track record remains dismal — especially compared to income-generating assets like stocks and bonds, the firm noted.

Francisco Velasquez is a Reporter at Yahoo Finance. Follow him on LinkedIn, X, and Instagram. Story tips? Email him at francisco.velasquez@yahooinc.com.

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