The Top Asset Class Over 10 Years: The Winner Is ...

The Top Asset Class Over 10 Years: The Winner Is …
Red Sea Egypt by Julian Cohen. Why?

The colourful patchwork quilt of a chart below uncovers the best performing asset class over the past decade, revealing a rather surprising result

The Best Performing Asset Class Has A History Stretching Back More Than 2,700 Years

Discover The Leading Asset Class For The Past Decade

In any particular year, one asset class will outperform all the others.  Yes despite the best people in the world spending untold time on this, including a variety of Nobel Prize winning mathematicians, no amount of skill or experience has enabled anyone to accurately forecast how any asset class will stack up in any particular year.

As a result, those who try to predict and time any asset class investment usually get burned.  This is nicely illustrated in the chaotic colours of this patchwork quilt of total returns by asset class put together by Business Insider.

asset class

Ten Year Performance By Asset Class

The illustration above breaks down asset class performance over the last decade. It’s arranged in a variety of different baskets of assets such as bonds, commodities, gold, stocks, real estate, and emerging markets. It uses indices that serve as a proxy for a specific asset class. For example, the Bloomberg Commodities Index acts as a broad representation of the performance of all commodities in different sectors. There’s a list below describing each item on the chart and the relevant index that’s been used.

And The Winning Asset Class Is... Gold !


Although gold has had a tricky time in recent years, it’s been the top performing asset class over the last decade.  It’s delivered a healthy annualised return of 10 per cent.  Gold was also the top or second top performer for five of seven years between 2005 and 2011 throughout the most tumultuous period of the naughties. It illustrates that even though metal markets were exposed to intense bull and bear runs, it takes many years to cool the momentum before the next upswing may begin.

If you want to buy gold for your SIPP, it has to be the right variety to be acceptable to HMRC.  You can find details of SIPP acceptable gold in the Members Area of SIPPclub, by clicking the blue Invest at the top of any page.

Diversification Across Asset Class Is Important

It’s clear that stocks in emerging markets have out-performed almost every asset class in the good years.  But in the bad years, they are the worst performing asset class on the chart. If you just invested in a portfolio of emerging market stocks, you’d suffer an incredible roller coaster of a ride that could turn the stomach of even the most seasoned investor.

John Stoltzfus from Oppenheimer suggests it teaches us a valuable lesson in investing.

In our view, the quilt illustrates the importance of portfolio diversification and regular rebalancing. On its own, each asset class can be quite volatile, but a mix of assets in a balanced portfolio can lower overall volatility.

Bonds As An Asset Class Can Be A Safe Bet

Outside of highly-leveraged Wall Street traders, most investors consider bonds to be quite boring. In the last ten years, returns of the Barclays Aggregate Bond Index have ranged between -2.0 per cent and 7.8 per cent. Bonds are typically considered a relatively consistent and less volatile asset class, which helps create a baseline for a portfolio. However, on the chart, bonds are all over the place primarily due to the fact that other investments are swinging about with volatility. In the 2008 crisis, bonds were actually the best performing class, returning 5.2 per cent on the year.

However, there has been significant recent speculation of a bond bubble, so bonds may not be boring for too long.

What The Asset Class Chart Reveals


And Rebalance.

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Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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The Legend Of Returns By Asset Class

  • REITs: Real estate investment trusts, a proxy for property and real estate.
  • MSCI EmMkts: Index tracking 838 companies in 23 emerging markets countries.
  • MSCI EAFE: Measures performance in Europe, Australasia, and Far East. Essentially a barometer for equity performance outside of the US and Canada.
  • Russell 2000: Index tracking 2000 smallcap equities in the United States.
  • S&P 400: The S&P Midcap 400 is a benchmark for midcap companies in the United States.
  • S&P 500: The S&P 500, one of the most commonly followed indices, covers a diverse set of 500 large companies with common stock on the NYSE and NASDAQ exchanges in the US.
  • B’berg Commod: A broadly diversified commodity index tracking the futures of 22 different commodity markets in seven sectors.
  • Mkt Neut HFs: Market-neutral hedge funds seek to avoid forms of market risk by hedging.
  • Gold: The price of gold.
  • Barclays Agg Bond: Broad base index includes treasury securities, government agency bonds, mortgage-backed bonds, corporate bonds, and a small amount of foreign bonds traded in the US.