Best Investment Past 10 Years

What has been the best investment over the past 10 years? The best investment over the past 10 years was large cap U.S. stocks. The benchmark used to represent large U.S. stocks in this investing quilt was the S&P 500 index. The annual return for the past 10 years was an average of 8.81%. Apple, Microsoft, and Amazon are examples of large companies in the S&P 500 index. It’s worth noting that large cap stocks were down 37% in 2008 during the bear market that took the S&P 500 index down 54%.

This post is about the best investment over the past 10 years along with the next 4 runner-ups’ best performance of indexes representing the major asset classes. The investing quilt below provides a great visual for any investor that has had money in stocks, bonds, cash, or real estate over the past 10 years. You can see how the asset class you have owned compares relative to other asset classes.

Novel Investor Asset Class Returns Quilt
Source: Novell Investor  
Small cap U.S. stocks were the second best investment in the past 10 years with an average annual return of 7.16%. The Russell 2000 index was the small cap index used in the investing quilt.

Real Estate Investment Trusts, as represented by the FTSE NAREIT index was the third best investment over the past 10 years with an average annual return of 6.64%.

Finally, bonds enter the scene as the fourth best investment over the 10 years ending in 2022 with a 6.02% average annual return. The type of bond that made fourth place was high yield bonds. The higher interest rate would have certainly contributed to the overall return numbers. Even though bond interest rates were low during most of the 10 years, high yield bonds would have had a higher yield than higher quality bonds.

Note that the fifth best investment over the past 10 years was a diversified portfolio based on a buy and hold strategy using a strategic type of asset allocation. This reminds us that we probably don’t want all investments in one place.The asset class diversification, which included defensive investments in bonds, did come at a cost, however. The 10 year average return was only 4.87%.

The asset allocation was as follows:

Large Cap U.S. Stocks – 15%
International Stocks – 15%
Small Cap Stocks 10%
Emerging Market Stocks 10%
REITs 10%
High Grade Bonds 40%

The portfolio was rebalanced each year back to these percentages thereby adhering to a strict buy and hold asset allocation model. The goal with a strategic asset allocation like this is that at least one asset will go up when stocks go down offsetting stock market risk during bear markets.

International developed stocks were not among the best performing major asset classes as you can see from the investing quilt above, based on the MSCI EAFE Index which represents stocks in Europe, Australasia, and the Far East (East Asia).The average return for the EAFE index was only 2.29% over the past 10 years.

Notice, however, that international developed stocks were the third best investment for 2009 with a high 32.5% return. In 2017, EAFE was the second best investment with a return of 25.6%.

Note that the second worst performing investment for the 10 years was another stock market index, the MSCI Emerging Markets index. This index represents stocks from 24 countries including Brazil, Colombia, Egypt, Chile, China, Czech Republic, Greece, India, Hungary, Korea, Thailand, Turkey, and Taiwan. The countries represented in this index are less developed than those in the EAFE.

It’s also very interesting to note that large and small cap stocks were the two best investments in the past 10 years, overall, even though real estate was the best investment in 6 of the 10 years.

What was the worst investment over the past 10 years? Cash was the worst investment with a .62% average return. That would equate to a negative real return after considering

inflation, even though inflation was relatively low for most of the 10 years.

Of course, we have to remember that “best investment” is a relative term. I am using the best return over the past 10 years as the qualifier in this post since everyone loves a high return investment when they are delivering. It’s important to remember there are other factors that determine the best investment for you at any given time, however.

The best investment is really one that allows you to get the best return while also investing within your acceptable risk level so you can feel confident and at peace with your overall wealth plan

The information on this website is for education only and is not to be construed as personal financial advice.