Investment Roundup: The Best Performing Assets
Where should you invest your money? It seems like a simple question, but there are quite a few right (and wrong) answers. It really depends on how different asset classes perform and the factors driving that performance. The best way to invest with confidence is to look at the best performing assets over a certain time period. Not only will it tell you what to expect in the way of return on investment, it’ll also help you understand how to position your investments in the short- and long-term.
To illustrate this point, let’s take a look at the best performing assets of 2021. Here’s a look at what you could’ve expected in terms of ROI last year, depending on where you invested your money.
1. Cryptocurrency (59.8%)
Bitcoin and other crypto assets might be off to a rocky start in 2022, but they had a phenomenal 2021. It just goes to show investors how the investment landscape can change over a time horizon as short as a year or even a few months. If you invested $1,000 in Bitcoin at the beginning of 2021, you would’ve ended the year up by about $570.
Of course, this doesn’t tell the whole story. Bitcoin and other crypto assets actually returned 100% at their peak in November 2021, before falling in December and into 2022. This sheds light on another investing concept worth observing in asset classes: volatility.
2. Crude Oil (56.4%)
Most people invest in crude one of two ways: through ETFs that track oil prices or through futures contracts. If you invested in the former and held throughout 2021, you likely saw returns upward of 56% for the year. This is highly irregular for crude and came about due to a smattering of very specific factors.
Oil prices jumped in 2021 on demand due to loosening COVID-19 restrictions, which fueled everything from travel to economic expansion. The first year after the peak of the pandemic was a natural rebound for one of the world’s most-used and most in-demand commodities.
3. Commodities (37.1%)
Speaking of commodities, if you invested in commodities in 2021, you saw a very nice return on these assets, likely due to price appreciation and demand. Commodities like food, livestock, lumber, cotton and other materials all saw surges in demand as the world began to recover after COVID-19. As a result, prices jumped and investors saw big-time returns: as high as 37%, not counting crude oil and natural gas.
It’s important to note that commodities aren’t typically associated with this level of price appreciation. Instead, they tend to be more defensive investments. As a result, it’s unlikely retail investors were heavily invested in commodities, save for some exposure through diversified funds or retirement accounts.
4. Real Estate (35.1%)
It was difficult to ignore the real estate market in 2021. Real property investments saw massive appreciation in a short period of time as valuations skyrocketed around the country. To put this in perspective, real property has an annual average appreciation rate of 3.5-3.8%. In 2021, the average ROI on real estate investments was closer to 35%: roughly 10 times the norm.
Sky-high real estate prices have led many to believe we’re in another real estate bubble, but that remains to be seen. The reality is, real property is often viewed as a safe haven asset when stock market volatility or downturn pushes risk-averse investors out. Global challenges have created broad-market uncertainty, which has made real estate an appealing asset class.
5. U.S. Equities (26.9%)
U.S equities are the obvious choice for retail investors because they’re the most accessible asset class. In 2021, they were also one of the best performing assets, returning an average of 26.9% to shareholders. It’s important to keep in mind that equities are broad, spanning multiple sectors. For instance, big tech massively outperformed in 2021, while telecoms severely lagged the market.
Stocks have taken a hit in 2022, but are slowly recovering. Geopolitical turbulence and an inflationary environment could put a damper on profits this year, and it’s unlikely that U.S. equities will continue to return such significant profits over the course of the year. Nevertheless, equities tend to deliver the best long-term results of any asset class.
What Were the Worst Performing Assets?
Looking back, 2021 was a great year for most major asset classes. If you owned crypto, real estate, commodities or U.S. stocks, you likely had a very good year! However, not all asset classes delivered such substantial returns to their owners. Here’s a look at the worst-performing assets of 2021:
- U.S. Treasuries, down 2.5%
- Gold, down 3.6%
- Emerging Markets, down 5.5%
- Silver, down 11.7%
Interestingly enough, since the beginning of 2022, both gold and silver have spiked in value (largely because of the Ukraine conflict). Moreover, U.S. Treasuries are climbing due to federal reserve interest rate increases. Even emerging markets have a positive outlook slated for later in the year. It’s a prime example of how markets are always in flux.
Looking Forward: The Best Performing Assets of 2022
Wondering what the best performing assets of 2022 will be? To get ahead of the curve and ride the wave to ROI, you need to pay attention to market-specific trends, as well as macro global trends. The best way to do it is to stay apprised of the news and subscribe to an investment newsletter that provides you with the insights you need to understand different asset environments.
There’s no way to predict the future, but it’s more than possible to make educated guesses about different asset classes and their potential for ROI.