Investment gains: top performer over 10 years may surprise you

An analysis of investment returns over a decade has delivered interesting results, but you wouldn’t want to bet your house.

Investment volatility will help shape people’s financial decisions.

Long-term investment is widely seen as the best way to build wealth, and most people would agree that 10 years is a good time frame for measuring an asset’s financial success.

So it may come as a shock to people that the best-performing asset over the past 10 years is one that has lost about 75 per cent of its value in just 12 months.

Yes, that’s right cryptocurrency fanatics and nonbelievers alike. It’s bitcoin, the world’s biggest digital currency, despite arguments still raging about whether it is a true asset or a $1 trillion-plus global Ponzi scheme.

Ray White chief economist Nerida Conisbee has analysed investments over the last 10 years and says bitcoin has grown in value by almost 160,000 per cent. A distant second is shares on the US-based technology index NASDAQ – up close to 300 per cent – followed by median house prices in most Australian capital cities, she says.

Conisbee says the lowest 10-year returns have come from term deposits, up 17 per cent, treasury bonds, up 37 per cent, and gold, up 57 per cent.

Global investment giant Vanguard goes back even further, to 1992, when measuring long-term investments, although it doesn’t include cryptocurrency – which began with bitcoin in 2009.

Ray White chief economist Nerida Conisbee examined investment returns over 10 years.

Vanguard says someone who put $10,000 into US shares 30 years ago will now have $182,000, assuming all income was reinvested. The same amount stuffed into Aussie shares in 1992 is $131,000, listed property has grown to $90,000 and cash to $36,000. All are above inflation, which itself more than doubled from $10,000 to $21,000.

It’s interesting to look back at asset class growth, but in reality it means little to anyone investing today. What we all want to know is what will be the best investment 10 years from now, so we can pile money into that.

Sadly, they don’t make crystal balls, so the best bet is to diversify across a range of assets and hope a few fire up.

As for bitcoin and the 22,000 other different cryptocurrencies that have followed it since 2009 as copycats jumped on the bandwagon, it’s a future that nobody can predict.

Sam Bankman-Fried, the founder of crypto exchange FTX that collapsed in November, was until recently estimated to be worth $US16 billion ($23 billion). Last week he said he was now worth $US100,000 ($146,000).

Very few people can wipe out that much wealth in such a short period, although many small-scale crypto investors are sharing the pain of losing much of their money.

Bitcoin or other digital currencies could again surge to absurd highs, as they did following their previous downturn from 2018 to 2020, but there’s also a chance they could collapse to nothing.

Remember that massive 160,000 per cent gains are not only limited to speculative things like crypto.

One of Australia’s 20 biggest companies, Fortescue Metals Group, owns iron ore mines and was trading at just 1c per share two decades ago. On Friday it closed at $19.68 a share, a 197,000 per cent gain, not including its dividend yield that is currently above 10 per cent.

Investing in anything in its early stages has the potential for huge gains, and also huge losses.

It can be worth having a bet on them, as long as you don’t bet your house.

Originally published as Investment gains: top performer over 10 years may surprise you