Last Updated on 22/02/2024 by Carl-Peter Lehmann
Analyzing Performance of Various Asset Classes and the Best Performing Asset Over the Last 10 Years. In the dynamic world of investment, the narrative of various asset classes over the last decade is a compelling study of contrasts and endurance. The quest to discern the best performing asset of the last 10 years has unfolded against a backdrop of both local and international economic forces. From the buoyant early years of SA Real Estate to the tech-driven surge of global equities, investors have navigated a complex terrain of opportunities and risks. This story, grounded in data and shaped by the fluctuating Rand, offers a clear-eyed reflection of the past and a strategic compass for future financial planning. As we explore the performance of diverse asset class returns, we aim to provide a measured analysis that informs and guides investors through the intricacies of building resilient portfolios in a transforming market.
Asset Class Returns Compared
When we reflect on the last decade, we can’t help but marvel at the meteoric rise of Bitcoin. It’s like the wild west of the digital age—an asset class that has outperformed all traditional benchmarks, often leaving investors both exhilarated and exhausted by its volatility. Bitcoin has been the rebellious outlier, soaring to heights that make these solid, yet earthbound assets seem almost pedestrian in comparison. We highlighted in this recent piece on Bitcoin how it has delivered an average annual return of over 600% over the last 10 years.
Clearly that’s off the charts and not sustainable, but nonetheless none of the more ‘traditional assets’ have come close. Gold has delivered a very pedestrian return of about 4.30% p.a. in comparison and one of the hottest stocks in the world in the form of Nvidia has compounded by about 70% a year on average over the last 10 years. Betting on a single asset or stock however is never a good idea because having all your eggs in one basket can lead to disaster – so let’s see how some of the more traditional asset classes stack up.
Best Performing Asset Last 10 Years Globally (USD)
Alright, let’s take a stroll down the performance lane of the last decade. At first glance, it’s a kaleidoscope of numbers, but each shade represents a story in the global market.
Starting with the vibrancy of Emerging Markets Equities, it’s clear they’ve had quite a journey. From the heights of over 16% returns in the early years to the perennial underperformers over the last 5-6 years as trade wars and China’s woes in particular have seen this sector struggle.
North American Equities (and thanks largely to the Tech Titans) have shown remarkable consistency, hovering in the upper echelon throughout the decade. With the most recent years showcasing double-digit returns, it seems that the combination of innovation, market size, and economic policies has favored investors with a North American focus.
On the other side of the spectrum, we’ve got Global Bonds, generally considered the tortoise in the race, offering stability and predictability. Yet, even the tortoise had its challenges, especially in the last few years where we see the returns dip into the negatives, likely reflecting the global economic uncertainties and changing interest rate environments.
The story of European Equities is more nuanced, with a mix of moderate to high single-digit returns. It’s like a mosaic of different economies each with their unique fiscal dynamics and market drivers, and with the more value orientated bias of European Equities simply unable to compete with the growth of technology that drove US and North American market returns.
The “Balanced Portfolio” – seems to be the steady ship, sailing through the stormy waters with a blend of resilience and adaptability. It’s like the financial equivalent of a well-rounded individual, not excelling in one area but competent across the board. If a good balanced fund can deliver returns in the 5%-6% p.a. range in USD, it’s done its ‘job.’
What’s fascinating here is the narrative of risk and return, and the perennial dance between growth and safety. Being overweight growth as a style and factor has paid dividends for the most part (over value) with its prominent weighting both in North American and Global Equities; and with interest rates low (and in many place negative for many years) bonds were not attractive at all – even took a massive hit when inflation and rising interest rates made an appearance in 2021-2022.
Further Reading: Best Performing Global Equity Unit Trusts in South Africa
Asset Classes and the Best Performing Asset Last 10 Years Locally (ZAR)
SA Real Estate certainly had a spirited sprint out of the gates in the first half of the decade. However, the latter half paints a more subdued picture. Much like the famed Cape Doctor wind that starts off strong but can fade away, the returns in the real estate sector cooled down significantly. This performance shift serves as a poignant reminder of the cyclical nature of real estate markets, with initial exuberance giving way to more tempered expectations.
And we must consider the currency angle. With these figures denominated in Rands, it’s essential to account for the Rand’s depreciation against the dollar over the period. This devaluation can significantly affect the real value of these returns from an international perspective. For a global investor, the Rand’s slide turns a seemingly rosy picture into a more complex narrative, where local gains may be eroded when converted back to a stronger currency like the USD. But it has meant being invested in Global Equities has far-and-away delivered the best returns by a mile.
SA Equities have for the most part been a disappointment with their annualized 8.72% return over 10 years. The knock-on effect of that is the SA MA High Equity category, which often serves as the backbone for pension funds and retirement capital, has also seen disappointing returns. These funds are typically tasked with the goal of achieving an “Inflation Plus 5%” return, which is essential for ensuring a comfortable retirement. However, the returns we’re seeing here suggest that many funds may have fallen short of this benchmark. For South African investors, particularly those eyeing retirement, this could mean recalibrating expectations or rethinking investment strategies to meet their long-term goals.
SA Bonds have for the most part done relatively well with their Inflation Plus 2-3 Returns, and even Cash has managed to beat inflation.
Clearly, the last decade hasn’t been great for local markets for the most part. Will SA and Emerging Markets make a comeback? Or will better returns continue to be found elsewhere … time will tell.
Consider Reading: Best Performing SA Equity Unit Trusts
Conclusion
In the world of investing, diversification is our North Star, guiding us through the unpredictable seas of asset returns. The past decade has shown us that betting on a single asset class is like trying to predict the next big meme: it might make you a legend, or it might just lead to catastrophic failure.
Will Bitcoin be the golden goose or just another ‘remember when’ story? Can AI outsmart market volatility, or will it just give us fancier charts? We can’t say for sure which assets will lead the next decade’s charge, but one thing’s certain: spreading your investments is like having an all-terrain vehicle in the financial safari—no matter the conditions, you’re equipped to move forward.
So here’s to the investors who diversify—it’s the wisest move you’ll ever make. Because when the next decade rolls in, we’ll either be toasting our foresight or laughing over an AI’s suggestion to invest in Martian vineyards. Cheers to the future, unpredictable as it may be!
Further Reading: 15 Timeless Investing Advice Principles To Ensure Long-term Success
