Bonds are be an integral part of a well diversified portfolio. While equities can generate amazing returns when equity markets are booming but can decline when markets turn south. Bonds on the other hand, tend to earn average returns when bonds markets do well and their negative returns during other times are low. In addition, fixed income assets such as bonds provide a cushion effect to a portfolio when equity markets crash.

The following chart shows the Average Annual Returns for US Bonds by Calendar Year 1926 to 2025:

Click to enlarge

Source: Student of the Market-January 2026, Blackrock

In 2025, US bonds performed very well relative to their average returns. Bonds can also earn amazing returns as shown above during the 12 years when they yielded over 10%.

Related ETFs:

• iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
• Vanguard Total Bond Market ETF (BND)
• SPDR® Barclays High Yield Bond ETF (JNK)
• iShares Core Total U.S. Bond Market ETF (HYG)
• iShares TIPS Bond ETF (TIP)

Disclosure: No positions

Dividends form an integral part of evaluating the return on an investment. Dividend returns account for a higher proportion of total returns than capital appreciation in some markets. While in other markets such as the US, share price growth is the largest contributor of total returns. The following chart shows the split of total returns for select major indices:

Click to enlarge

Source: Factset via Finding yield on the ASX by Steve Lambeth, FirstLinks

Foreign markets such as Australia, the UK, etc. are known for their high dividend yields. Australia in particular is a perennial income investor destination due to the favorable policy of dividend imputation.

The current dividend yield on the ASX200 is about 3.4% while the dividend yield of the D&P 500 is just 1.13%.

Related ETFs:

• SPDR S&P 500 ETF Trust (SPY)
• iShares MSCI Australia ETF (EWA)

Disclosure: Long SPY

The US equity market has historically performed well over the years. Stocks generally tend to grow over time and an investor with a long-term horizon can earn a decent return in equities than other asset classes. Over the past 100 years US stocks have had more positive returns years than negative ones. The following chart shows the average annual return of stocks from 1926 to 2025 by calendar year:

Click to enlarge

Source: Student of the Market-January 2026, Blackrock

A few observations on the above chart:

• In the past 100 years, the market has lost money in just 26 years.
• The market returned the average of 8% to 12% in only 6 years.
• In 36 years the market has had a return of over 20%.
• Over the century, stocks earned average or above average returns more times than they were down.

The entire report in the above link is worth a read.

Related ETFs:

• SPDR S&P 500 ETF Trust (SPY)

Disclosure: Long SPY