The best performing asset classes over the past 20 years revealed
Investment management services firm Fidelity International has announced the best-performing asset classes over the last two decades, revealing insights that could prove useful for investors.
New data released by Fidelity International has shown that no asset class has been the best performer for two years running in the past 20 years.
The news illustrates how difficult it can be to predict future asset class performance based on previous years. For example, while US equities were the best-performing asset class in 2016, Japanese equities performed twice as well the year before in terms of returns.
Similarly, in 2008 government bonds performed best, while emerging markets performed worst; the following year, these asset classes swapped places.
In some cases, canny investors may be able to capitalise on that reversal of fortune.
Commenting on the data, Fidelity International investment director Tom Stevenson said that these findings demonstrate the importance of asset diversification.
"Trying to predict the best-performing asset class, year in year out, is a fool’s errand," he says.
"Indeed, over the last 20 years no asset class has managed to hold onto its title of being the best performer over consecutive years. A balanced portfolio, split between equities, bonds, real estate, commodities and cash, really can help smooth investment returns and lead to better long-term outcomes for disciplined investors."
Note that all of the charts below can be expanded by clicking on them.
Top three asset classes by performance
Worst three asset classes by performance
He adds: "What’s really interesting is that the relationship between risky assets such as equities and commodities and defensive assets like bonds and cash is not symmetrical. Over the past 20 years there have been a number of years when risky and defensive assets have balanced each other out, leading to a neutral overall return. There have been some years when everything has risen together.
Performance of asset classes over the past 20 years
"But what the past 20 years has not delivered is a single year in which everything has fallen together. This is really good news for a hands-off, long-term investor because it means that they can sensibly invest in a well-balanced portfolio and just forget about it."
This story was originally written for our sister magazine, Money Observer.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
A term applied to raw materials (gold, oil) and foodstuffs (wheat, pork bellies) traded on exchanges throughout the world. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed price on a specific date. Because commodity prices are volatile, investing in futures is certainly not for the casual investor.