3 Investments With Best Long-term Track Records

23-Jun-2017

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Investment is a subjective matter and depends on the risk taking the capacity of the individual. For instance, someone who is in his 50s would not want to invest the major portion of their capital into equities, rather would look for instruments that give him decent and stable returns. On the other hand, someone in his 20s and 30s will have a higher risk-taking capacity and invest in equities, instead of going for low-risk and low-return instruments.

Investment ChartHowever, over the years, there have been a few investment strategies that have worked well for all the ages and class of society. Before talking about the three best investment class that give highest returns, one should be aware what long-term actually means. If we were to compare the long-term performance of different asset classes, then the time frame is somewhere between 20 years to 25 years. Now, let’s talk about the 3 best investment options;

Equities

Over the years, equities have been one of the best performing asset classes across the globe. What many of us do not understand is that equity market has a full cycle of highs and lows, and in case, you do not keep invested throughout one full cycle, then the return would not be as expected.

In the chart above, the US equities are compared with three other investment avenues. The US equities are clearly the winner generating much higher return compared to other three investments avenues.

Investment Grade Bonds

There is no doubt about the fact that global economy is not that strong. Markets can be quite volatile due to the fast changing macroeconomic scenarios around the world. So, many are looking to save their capital and also get a stable return. Therefore, for those looking to safeguard their money, and at the same time, earn stable returns can go for the Investment Grade Bonds.Investing in Malta

An Investment Grade Bonds are the ones that are rated by rating agencies such as S&P and Moody’s. Therefore, not all high yield bonds will be investment grade. The rating tells how eligible the issuers of these bonds are to pay back the loan that they have taken along with offering returns to the bond holders. A bond is considered investment grade if its credit rating is BBB- or higher by S&P or Baa3 or higher by Moody’s.

In the table, at first look, it seems that High Yield Bonds give more returns, but a closer look suggests that Investment Grade Bonds are more consistent unlike the fluctuations seen in the High Yield Bonds.

Hedge Fund   

“If an individual is looking for higher risk-adjusted returns, then hedge fund and private equities are the best options,” says Thomas from CSB Group hedge funds division. As the name suggests, Hedge Funds look to minimize the risk and increase the return by hedging their position in the market.

From decades, this is one asset class, which has given decent returns without fail. When we compare the long-term performance of all investment avenues by decade, Hedge Funds emerge as the clear winner.

A Hedge Fund that offers stable returns also enhances the stability of an Individual’s portfolio when other investments (considered as traditional avenues) are not performing as well as they should be. Real Estate hedge funds are really doing well right now. “The property market has completely recovered and investors are eager to invest in the real estate market” says Jordan from Sotheby’s real estate.

A comparative table of Hedge Funds, US Equities and Bonds show that Hedge Funds have been clear outperformers when compared decade over decade. And investors are riding the trend.

What many experts will agree to is there are no fixed investment strategies. It all depends on an individual’s risk capacity and objective. But, there is no denying of the fact that in the long-term, equities outperform the bonds contrary to what many believe. While bonds are safer when it comes to stable returns, but if you are a high-risk and high-return taker, then bonds would not be your first choice. And, if you want the best of both worlds, then you can go for Hedge Funds.

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