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Which asset class performs best?
What we can learn from past years.

Historical statistics show that, despite market volatility, equities tend to provide investors with solid returns over the long term. But do they outperform the other asset classes?

To get a general idea, investment professionals make a practice of studying charts like the one below. As we can see, the diagram places the main asset classes in order of rank based on the returns they generated in each of the years in question.

 

Chart made up of blocks of different colours, with each colour corresponding to a specific asset class. The columns of the chart represent the years 2007 to 2018. In each one, the blocks are arranged from highest to lowest, based on the returns posted by each corresponding asset class: the classes with the best returns for the year are at the top and those with the worst returns are at the bottom. The whole thing shows that the relative ranking of each asset class varies widely from year to year. In many cases, an asset class that is at the top of the chart in a given year shows up at the bottom the following year, and vice versa.

 

Looking at this chart, we can make a number of observations.

One final observation: when you decide to invest in the stock market – by buying mutual funds, for instance – history tends to show that it’s better not to try “timing” the market by guessing when to get in or out. For example, after the crisis of 2008, anyone who was out of the market just for the 20 top trading days of 2009 would have missed out on more than half of the recovery posted by the S&P 500 index.

In conclusion, which asset class performs best? The answer: it depends on the period, your tolerance for volatility, and your goals.

 

The following sources were used to prepare this article.

Accessible Investor,Asset class returns (2018)”.
Charles Schab,7 investing principles”.
Fidelity,Fidelity Freedom 2025 Fund”.
Get Smarter About Money,Interactive investment graph”.
Visual Capitalist,How Every Asset Class, Currency, and Sector Performed in 2018 ”, January 2019; “The Historical Returns by Asset Class Over the Last Decade”, July 2015.