The top investment strategies of the last decade revealed

Investors who backed tech stocks over the past decade are said to have had some of the highest returns, according to new research.

While the performance of tech-focused funds has been abysmal over the past year, they haven’t been knocked out of the top spot when looking at performance over the past decade.

Analysis by AJ Bell shows that investors invested in the L&G Global Technology fund would have earned a 466.3 percent return on their investments since 2013.

Bitcoin investors have had by far the best returns over the last decade.

Someone who deposited £1,000 in early 2013 would be sitting at £1.6 million today, despite the cryptocurrency falling 60 percent over the past year.

“Those who have sat through the crypto craze can take comfort in the fact that the number of Bitcoin believers who have made the full ten-year return is probably as small as that number is large,” said Laith Khalaf, head of investment analysis at AJ call.

“Unlike Bitcoin, there will be plenty of investors who have ridden the technology wave, which is why this category should be seen as the most successful mainstream investment strategy of the past decade.”

Unsurprisingly, growth stocks have had an 80% return lead over value since 2013, despite the fact that the MSCI World Growth Index gained -20.3% last year.

Khalaf said: “The changing of the guard could be even longer, 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 the out-of-favor and so-called sin stocks that delivered the highest returns last year.

Big winners: Bitcoin, L&G’s Global Technology Fund and following Warren Buffett all proved fruitful investment strategies over the past 10 years

AJ Bell’s analysis shows that investors investing in the “bargain hunter” strategy — investing in the worst-performing sector, in this case Latin America — would have earned a return of 16.4 percent last year.

The second best-performing strategy was trailing top investor Warren Buffett, whose Berkshire Hathaway fund backing Apple, Bank of America and Chevron returned 16.3 percent last year.

In dollar terms, Berkshire Hathaway was up 4 percent last year, still outperforming most of the market.

Laith Khalaf, head of investment analysis at AJ Bell, said: “The currency has also contributed to longer-term returns, with a ten-year dollar return of a still healthy 249.6 percent.

This currency advantage for UK investors is common across many of the categories in the Investor Strategy League, with the pound falling from around $1.60 a decade ago to around $1.20 today. This shows what a tailwind British investors have enjoyed from the weaker pound, which should not be relied upon to continue indefinitely.”

A basket of so-called sinful stocks selling tobacco and fossil fuels also returned 16.3 percent in 2022, and they’re starting to catch up with ESG funds in 10 years.

With portfolios packed with growth stocks, sustainable funds have thrived in a low interest rate environment, but over the past year investors have moved from growth to value.

Last year, the global ESG fund achieved a return of -13.7 percent.

An investment in gold came in third, as it tends to rise in periods of volatility and is usually considered a safe haven asset.

An investor in a physical gold ETF would have made a return of 12 percent last year

Over a longer period of time, gold has not proven to be as lucrative, returning 43 percent over the course of a decade.

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“The poor performance of the past decade is heavily influenced by the fact that it hit high notes for a decade before suddenly falling back,” Khalaf said.

Cash and bonds, which were also considered safe assets, have also performed poorly over the past decade.

“Cash has been a poor asset over the past decade, with £10,000 invested in a cash Isa 10 years ago now worth £11,200, compared to £29,850 from a passive fund invested in the global stock market,” Khalaf said.

The weak performance of cash in 2022 may come as a surprise given that this was a year of sharply rising interest rates. Last year’s returns were hampered by the fact that average Cash ISA rates failed to keep pace with interest rate hikes, and even the most competitive deals.

“Looking at the best cash rates is always a good idea, but by 2023 it should be a more rewarding practice than it has been for quite some time.”