Investors who backed technology stocks over the last decade would have enjoyed among the highest returns, according to new research.
While the performance of tech-focused funds has been woeful over the last year, they haven’t been knocked off the top spot when looking at performance over the last decade.
AJ Bell analysis reveals investors who invested in the L&G Global Technology fund would have seen a 466.3 per cent return on their investments since 2013.
Investors in Latin American funds in 2022 would have secured a 16.4% return last year… but tech stocks reign supreme over the last decade
Bitcoin investors have enjoyed the best returns over the last decade by a long way.
Someone who put in £1,000 at the beginning of 2013 would be sitting on £1.6million today, despite the cryptocurrency plummeting 60 per cent over the last year.
‘Those who have sat out the crypto craze can console themselves with the fact that the number of Bitcoin believers who have captured the full ten-year return is probably as small as that number is large,’ said Laith Khalaf, head of investment analysis at AJ Bell.
‘Unlike Bitcoin, there will be plenty of investors who have ridden the technology wave, and so this category should be viewed as the most successful mainstream investment strategy of the last decade.’
Unsurprisingly, growth stocks have an 80 per cent performance lead over value since 2013 despite the MSCI World Growth Index returning -20.3 per cent last year.
Khalaf said: ‘The changing of the guard may yet have further to run, with higher interest rates potentially acting as a millstone around the valuations of growth companies.’
In the face of higher inflation and economic uncertainty, it was out-of-favour and so-called sin stocks which saw the highest returns last year.
Big winners: Bitcoin, L&G’s Global Technology Fund and following Warren Buffett all proved fruitful investment strategies in the last 10 years
AJ Bell’s analysis reveals investors who invested in the ‘bargain hunter’ strategy – investing in the worst performing sector, in this case Latin America – would have returned 16.4 per cent last year.
The second best performing strategy was to follow top investor Warren Buffett, whose Berkshire Hathaway fund which backs Apple, Bank of America and Chevron returned 16.3 per cent last year.
In dollar terms, Berkshire Hathaway was up 4 per cent last year, still outperforming most of the market.
Laith Khalaf, head of investment analysis at AJ Bell said: ‘Currency has helped longer term returns too, with dollar returns over ten years coming in at a still healthy 249.6 per cent.
‘This currency boon for UK investors is common across many of the categories in the Investor Strategy League, with the pound falling from around $1.60 ten years ago to around $1.20 today. This shows what a tailwind UK investors have enjoyed from weaker sterling, which shouldn’t be relied on to continue indefinitely.’
A basket of so-called sin stocks peddling tobacco and fossil fuels also returned 16.3 per cent in 2022 and they are starting to play catch up with ESG funds over 10 years.
With portfolios packed full of growth stocks, sustainable funds flourished in a low-rate environment but over the past year investors have moved away from growth into value.
Last year the global ESG fund returned -13.7 per cent.
An investment in gold came in third, as it tends to rally in periods of volatility and is usually considered a safe haven asset.
An investor in a physical gold ETF would have seen a 12 per cent return last year
Over a longer period gold has not proved to be as lucrative, returning 43 per cent over the course of a decade.
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‘Its poor showing over the last decade is heavily influenced by it hitting high notes ten years, before falling back precipitously,’ said Khalaf.
Cash and bonds, which have also been considering safe assets, have also performed poorly over the last decade.
‘Cash has been a poor asset to hold over the last ten years, with £10,000 invested in a cash Isa 10 years ago now being worth £11,200, compared with £29,850 from a passive fund invested in the global stock market,’ said Khalaf.
‘The weak performance of cash in 2022 may come as a surprise, given this was a year of sharply rising interest rates. Returns in the last year were hampered by the fact that average Cash ISA rates have failed to keep pace with interest rate rises, and indeed with the most competitive deals.
‘Shopping around for the best cash rates is always a good idea, but in 2023 it should be a more rewarding practice than it has been for some considerable time.’
|Total 10 year return||Total 1 year return|
|Global technology fund||466.30%||-27.80%|
|MSCI World Momentum Index||301.20%||-7.40%|
|MSCI World Quality Index||290.70%||-12.40%|
|MSCI World Growth Index||253.00%||-20.30%|
|Global passive fund||198.50%||-8.80%|
|Global active fund||176.30%||-12.30%|
|MSCI World Value Index||171.80%||5.30%|
|Global ESG fund||166.20%||-13.70%|
|Global investment trust||142.10%||-20.70%|
|UK Small Cap investors||130.80%||-25.20%|
|Balanced managed pension fund||71.70%||-10.00%|
|Random fund selector||67.70%||-1.60%|
|Institutional fund investors||34.50%||-12.20%|
|Bond investors (UK gilts)||3.10%||-23.90%|
|Source: AJ Bell|