Which Investment Performs The Best?

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Answering that question could make the difference between a luxurious lifestyle and a lifetime of scraping.

Classical author Mark Twain famously gave the nod to property because no one is making any more land.

Others swear blind by stocks and shares.

But what about the new kid on the block – cryptocurrency?

Each investment has benefits and disadvantages, but over recent years, is there a clear winner?

Property, Shares And Crypto

Sorting through years of data to find which investment performs the best is no easy feat.

For expats, the answer can depend on where you live.

The US stock market has historically outperformed all kinds of financial securities and property over the past 100 years. But that’s the US. In the UK, property is the big winner.

More recently, dabbling in cryptocurrency has led to instant winners or losers who can make millions in a day – and then lose the lot within a few minutes.

UK Property Over The Past 50 Years

Stripe Property Group looked at house price data since 1972 to compare how much an average home was likely to cost 50 years ago and now.

In 1972, the average home cost £5,158, which rounds up to an inflation-adjusted price in 2022 of £49,333.

The Office of National Statistics reckons an average home in the UK was worth £278,436 in May 2022.

In 50 years, the value of an average home has soared by 464 per cent.

To reach this figure, the value has surged by 9.3 per cent each year since 1972. The increase is equivalent to a home earning £4,582 a year for the 50 years, or £229,100 in capital gains.

677% Profit For London Homeowners

London owners have seen the most significant growth in home prices over the past five decades.

House prices in the capital have shot up 677 per cent since 1972.

After adjusting for inflation, owners have seen a 13.5 per cent rise in prices in each of the 50 years – adding £9,000 a year to their property’s value.

These crazy, sustained price rises take into account crashes in the market and the global financial crisis in 2007.

Outside London, the biggest property price rises were in the East Midlands and South West.

Homeowners in both regions enjoyed 10.7 per cent gains each year for five decades, adding £4,051 and £5,288 to property values, respectively.

Property Is A Safe Bet

The East of England, the South East, North West and North East all had 10.6 per cent a year growth.

“Whether you’re purchasing for yourself or as an investment, there’s no safer bet than the UK property market when it comes to a consistently strong return,” said James Forrester, managing director of Stripe Property Group.

“To think, having purchased 50 years ago, you would have seen the equivalent of £4,500 accumulated per year is pretty remarkable, and this increase speaks volumes about the resilience of the market.”

FTSE 100 Returns 1377%

The good news is since the FTSE 100 was introduced in 1983, there has never been a ten year period where investors lost money.

Looking back on how UK stocks and shares have performed for the top 100 companies reveals a total return of 1377 per cent at an annual rate of 7.75 per cent a year between 1984 and 2019.

Performance of the FTSE 100 depends on a range of factors.

Company profits depend on tackling a mix of variables like inflation, GDP (gross domestic product), government policy and the cost of raw materials all influence how much money a company might make.

Like property, investors should understand that the price of stocks and shares is not a continual upwards ascent – values drop when the economy is not doing well or in recession and rise again when markets improve.

Cycle Of Losses

For example, the FTSE 1000 gave a 35.1 per cent return in 1989 – the highest rate between 1984 and 2020, while the lowest return in the same period was a loss of 31.3 per cent in 2008.

Analysis of the data by fund manager IG disclsoes that the London stock market drops by 30 per cent every decade. Episodes include during the coronavirus pandemic, the 2007-08 global financial crisis and Black Monday in 1987.

During the past decade, the FTSE 100 total return 103.98 per cent with dividends reinvested or a 7.38 per cent annualised return. The average annual return is a long way off the best and worst returns for specific years.

Including every ten-year holding period since 1984 gives an average annual return of 8.43 per cent. The worst ten year return was 3.20 per cent (0.32 per cent annualised), while the highest was 403.12 per cent (17.53 per cent annualised) between December 31,1988 and December 31, 1998.

Best and worst FTSE 100 returns 1984 – 2020

Total returnAnnualised return
Source: IG

Bitcoin Is Best Investment Of Decade

Bitcoin was the best performing asset of the decade, returning ten times more profits than the Nasdaq 100.

The cryptocurrency had an annualised return of 230 per cent.

After reaching just over $60,000 in October 2021, the price has slumped to $21,000 and experts are warning of further losses.

Going live on the internet in January 2009, the price of Bitcoin floated at less than $1,000 until November 2017 when the price rocketed to $16,000. The price dropped again before kicking into action again in August 2020, when the crypto’s value rocketed to new record heights. However, charting at $46,000 in April, since then Bitcoin has lost more than half of its value.

Bitcoin is not the only crypto to suffer buffeting from falling prices. The total cryptocurrency market has lost more than $200 million in value this year and has fallen below a market capitalisation of less than $2 trillion

What’s The Best Investment FAQ

Does timing impact investment value?

Timing is important for investors, but that doesn’t mean trying to best guess how the market moves. What is more important is the annualised return. Investors buying FTSE 100 shares in 1989 picked up an annual average return of 18 per cent over the following decade, but if they had bought 12 months earlier and held for ten years, the annual average return was 0.3 per cent.

Why is the Bitcoin price plunging?

Bitcoin looks like falling into a bear market as prices drop by more than 20 per cent. The market is expected to fall further as investors cut their losses amid gloomy economic and market sentiment. A bear market is typified by having more Bitcoin sellers than buyers, which drives the price down.

Why is property so attractive to investors?

Historically, property prices have continued to rise despite the odd economic setback forcing values down for a limited time on occasions. Rising property prices plus a revenue stream of rents generate investors’ cash-flow and an appreciating asset.

Can I hold property, shares and crypto in a pension?

The deciding factor is where the pension is held. The UK investment regulator, the Financial Conduct Authority has yet to give the nod to holding Bitcoin or other cryptocurrencies in a retirement fund. However, some US retirement savers can include crypto in their funds. Most pensions allow savers to invest in property and shares.

What is the best investment?

The factor that seems most important is the long-term gain of an investment – and that means a holding period of 10 years or more. The asset class is less important as property, shares and cryptocurrency all increase in value over ten years or longer.

Below is a list of some related articles, guides and insights that you may find of interest.

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