What Was the Best Portfolio Over the Last 50 Years?

By Nick Maggiulli, originally published at Of Dollars And Data.

A few months ago, I analyzed U.S. stock returns over the last century. Today, I’m going to determine the best portfolio over the last 50 years among the following asset classes:

• U.S. Stocks
• International Stocks
• Real Estate Investment Trusts (REITs)
• U.S. Corporate Bonds
• 10-Year Treasury Notes
• 3-month Treasury Bills
• Gold
• Commodities
• U.S. Homes

To do this, I examined the BullionVault annual return data from 1972-2025 (54 years) to determine the optimal/best portfolio over this time period. But before we look at the optimal portfolio, let’s get a better understanding of how these various asset classes performed since 1972.

How Have Assets Performed Since 1972?

Since 1972, investors have experienced a wide range of outcomes including bull markets, bear markets, recessions, inflationary periods, and everything in between. As a result of this, asset class returns have varied widely as well. Below is a chart illustrating this for the nine asset classes listed above:

There are a few important things to note about these returns:

• Asset with Most Winning Years = Gold
  • Gold had 13 years (out of 54) where it was the asset class with the highest return. This means that Gold was on top roughly 1 in 4 years.
• Asset with Most Losing Years = Commodities/Gold
  • Both Commodities and Gold were tied for the assets with the lowest return in a given year. Each had 11 years where they had the lowest return.
• Best Overall Return = S&P 500
  • $1 invested into the S&P 500 in 1972 would’ve become $35.90 (in real terms) by 2025. This blows every other asset class out of the water. For comparison, here is what $1 invested in 1972 would’ve become by the end of 2025 (in real terms) for the next three highest growth asset classes:
    • Gold = $12.89
    • REITs = $12.26
    • International Stocks = $11.27
• Worst Overall Return = Commodities
  • Commodities had a negative real return from 1972-2025, as $1 invested in 1972 would’ve shrunk to $0.42 by 2025. More importantly, this negative return came with a high dose of volatility. The standard deviation on Commodities was 14% annually while still producing no long-term growth. As a result, this is an asset class I make sure to avoid.
• Most Volatile Asset = Gold
  • Gold’s best year was +106% in 1979 and its worst year followed shortly thereafter with -37.6% in 1981. Across all 54 years, the standard deviation was 24.7%, the highest among our asset classes. If you own gold, be prepared for big wins and losses along the way.
• Least Volatile Asset = 3-month Treasury Bills
  • Unsurprisingly, 3-month Treasury bills are the least volatile asset since they are basically the same as cash (or the risk-free rate). However, this lower volatility comes with a cost—lower long-term growth. $1 invested in 3-month T-Bills in 1972 would’ve only become $1.14 (in real terms) by 2025. This pales in comparison to the S&P 500’s overall growth of $35.90 or International Stocks which grew to $11.27 (in real terms) over the same time period.
• Best Inflation-Hedge = Commodities (and Gold if you’re lucky)
  • When we break out the data into high inflation (>4% CPI) vs. low inflation (<=4% CPI) periods, Commodities tend to perform the best among all assets. Despite its poor long-term returns, the average annual return for Commodities during periods of high inflation was about 2.9 percentage points higher than during periods of low inflation while the median annual return was basically identical. This wasn’t true for most of the other asset classes. For example, during periods of high inflation, the S&P 500 had an average return that was 11 percentage points lower (and a median return that was 17 percentage points lower) than during periods of low inflation. Similarly, International Stocks, REITs, U.S. Corporate Bonds, and 10-Year Treasuries all performed worse during periods of high inflation. Whether we use the average or median, returns were about 8 percentage points lower (if not more) during these periods.
  • Gold is a complicated edge case. Gold’s average annual return was 5.6 percentage points higher during periods of high inflation (compared to periods of low inflation). This is the highest among any asset studied. However, Gold’s median return was actually 7.7 percentage points lower during periods of high inflation. This demonstrates that Gold’s ability to act as an inflation hedge is based upon a few outlier up years (e.g., +106% in 1979, +59% in 1973, +49% in 1974, etc.) that may not repeat again in the future. For example, Gold recently had a +60% year in 2025, but this was 3 years after inflation peaked in 2022. 

My main takeaway from analyzing this data is that no single asset dominates. Some assets have more growth, some have more risk, and some only perform during certain economic regimes. Whether these asset classes will behave similarly in the future is up for debate.

Now that we’ve looked at how different asset classes have performed (in real terms) since 1972, what would have been the optimal mix to get the highest risk-adjusted return?

What’s In the Optimal Portfolio?

When it comes to the portfolio with the highest risk-adjusted returns (Sharpe Ratio) from 1972-2025 (i.e., “Optimal Portfolio”), the answer is:

• U.S. Homes = 36%
• S&P 500 = 27%
• Gold = 18%
• 10-Year Treasuries = 16%
• REITs = 3%

Note that 3-month Treasury Bills are absent because they serve as the risk-free rate, so by definition they can’t appear in the Optimal Portfolio.

The Optimal Portfolio allocation might surprise you, but a core reason for this is that U.S. homes are less volatile (since they are marked-to-market less often) while still having good returns since 1972. As a result, a U.S. home added a decent amount of return to your portfolio without adding much risk. You can see this in the plot below showing the annual return and risk (standard deviation) of the Optimal Portfolio, the efficient frontier, and a handful of other portfolios and individual asset classes: