What Can Investors Achieve in the US Stock Market?

/What Can Investors Achieve in the US Stock Market?

What Can Investors Achieve in the US Stock Market?

By | 2017-08-18T16:52:30+00:00 October 22nd, 2013|Research Insights|3 Comments

We did a fun project that sorts securites into decile portfolios based on the FUTURE 5-year returns and rebalances on a set interval.

Yes, a blatant look-ahead bias to see what the “perfect” 5-year forecasting investor would achieve.

  • Column 1 sorts every 5 years
  • Column 2 sorts every 3 years
  • Column 3 sorts every 1 year
  • Column 4 sorts every month
  • 1927-2007
5 year CAGR research report v01

[Click to Enlarge] The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

Key Takeaways?

  • ~30% CAGR is the upper limit of mid/large cap equity.
  • Max drawdowns cannot be avoided.
  • Standard deviation is a silly measure to examine when assessing risk/reward.

The full report can be accessed here:


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About the Author:

Wes Gray
After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.