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Bitcoin gamble has trounced traditional investment strategies

The new AJ Bell Investor Strategy League compares the performance of a plethora of different consumer investing styles to find out which have done best over the last year, and the last decade. Key findings from the 2022 AJ Bell Investor Strategy League include:

  • Bitcoin has trounced traditional investment strategies over one and ten years, but it remains a speculative gamble
  • It is followed (not very closely) by a global tech stock portfolio
  • Cash has been the weakest strategy over ten years
  • Index investors beat stockpickers in 2021, but over ten years stockpickers are just ahead
  • A strong year for residential property only bags a mid-table spot
  • ESG funds are also mid table, but considerably ahead of sin stock investors
  • Safe haven strategies like cash, gold and bonds are languishing at the bottom of the performance league over one and ten years
  • Warren Buffett has had a good year, but he only just nudges ahead of our random fund picker, Binky the cat 

Laith Khalaf, head of investment analysis at AJ Bell, comments:

“Professional investment strategies tend to be characterised according to four main style factors: growth, value, quality and momentum. However, it’s clear that consumers have a much broader approach to managing their finances, which encompass not just these stock market factors, but other assets such as cash, property and more recently, cryptocurrencies. Some consumers invest actively, others prefer index funds; some follow specialist strategies, while others look to limit risk.

“There’s no exhaustive list of investment styles, and many retail investors will mix and match. But there’s a dearth of literature which compares the different strategies that consumers, rather than professional investors, might pursue. The AJ Bell Investor Strategy League seeks to address this by looking at the performance of some key styles, strategies and asset classes that ordinary savers might adopt, ranking returns over one and ten years. This is the inaugural annual report, and we anticipate it will slowly change over time to reflect new investment trends, but each edition should reveal some of the key factors affecting investor returns and provide some context for financial decisions in the coming year.”

AJ Bell Investor Strategy League summary and table

“The overarching themes running through this year’s report are technology and risk. The top of the performance league is dominated by investment strategies that have had a big boost from US tech stocks. Basically, the higher your tech exposure over the last ten years, the better for your investment returns. The valuation of the US tech sector still divides opinion, but one thing everyone can agree on is it can’t be ignored, seeing as it now makes up such a large part of the global stock market.

“Risk has also been rewarded over the last ten years. This isn’t unusual, as over longer periods taking on higher risk should deliver better returns. The scale of the performance differential between higher risk equity strategies and safe haven assets is startling, however. A low-risk cash approach has turned £1,000 into just £1,142 over the last decade, while that £1,000 would now be worth £3,435 if invested in a global passive fund, and £8,140 for an investor who had gone all in on technology stocks. An analysis of long run historical returns tells us there’s a very strong chance that the stock market will outperform both cash and bonds again over the next decade, but it would have to pedal pretty hard to recreate the stellar growth seen in the last ten years.”

10 years 1 year
Investor style £1,000 invested Investor style £1,000 invested
1 Bitcoin believers
(Bitcoin price)
£11,135,639 1 Bitcoin believers
(Bitcoin price)
£1,615
2 Tech heads
(L&G Global Technology Index)
£8,140 2 Tech heads
(L&G Global Technology Index)
£1,341
3 Growth investor
(MSCI World Growth Index)
£4,917 3 World’s best investor
(Warren Buffett’s Berkshire Hathaway)
£1,309
4 Quality investor
(MSCI World Quality Index)
£4,821 4 Binky the cat
(Random fund picker)
£1,282
5 Momentum investor
(MSCI World Momentum Index)
£4,728 5 Quality investor
(MSCI World Quality Index)
£1,268
6 World’s best investor
(Warren Buffett’s Berkshire Hathaway)
£4,509 6 Value investor
(MSCI World Value Index)
£1,231
7 Performance chasers
(Best performing sector of previous year)
£3,967 7 Small Cap backers
(IA UK All Companies sector)
£1,229
8 Small Cap backers
(IA UK All Companies sector)
£3,781 8 Growth investor
(MSCI World Growth Index)
£1,223
9 ESG champions
(Average global ESG fund)
£3,627 9 International indexers
(Average global passive fund)
£1,214
10 Global stockpickers
(Average global active fund)
£3,501 10 Income investors
(IA UK Equity Income sector)
£1,184
11 International indexers
(Average global passive fund)
£3,435 11 Performance chasers
(Best performing sector of previous year)
£1,177
12 Investment trust investors
(AIC global investment trust sector)
£3,422 12 Herd investors
(Most popular retail fund sector of previous year)
£1,177
13 Value investor
(MSCI World Value Index)
£2,852 13 ESG champions
(Average global ESG fund)
£1,168
14 Egg spreaders
(20% in each global equity region)
£2,801 14 Global stockpickers
(Average global active fund)
£1,168
15 Sin seekers
(USA Mutuals Vice fund)
£2,493 15 Momentum investor
(MSCI World Momentum Index)
£1,157
16 Contrarians
(Least popular retail fund sector of previous year)
£2,436 16 Property tycoons
(Buy to let property returns)
£1,152
17 60/40 disciples
(Vanguard LifeStrategy 60% Equity fund)
£2,301 17 Egg spreaders
(20% in each global equity region)
£1,120
18 Property tycoons
(Buy to let property returns)
£2,207 18 Investment trust investors
(AIC global investment trust sector)
£1,103
19 Income investors
(IA UK Equity Income sector)
£2,151 19 Pension defaulters
(Average balanced pension fund)
£1,103
20 Pension defaulters
(Average balanced pension fund)
£2,096 20 60/40 disciples
(Vanguard LifeStrategy 60% Equity fund)
£1,095
21 Binky the cat
(Random fund picker)
£2,072 21 Contrarians
(Least popular retail fund sector of previous year)
£1,035
22 Herd investors
(Most popular retail fund sector of previous year)
£2,046 22 Cash savers
(Average Cash ISA)
£1,003
23 Institutional fund investor
(Most popular institutional sector of previous year)
£1,676 23 Institutional fund investor
(Most popular institutional sector of previous year)
£999
24 Bond buyers
(IA UK Gilt sector)
£1,380 24 Sin seekers
(USA Mutuals Vice fund)
£988
25 Bargain hunters
(Worst performing sector of previous year)
£1,358 25 Gold bugs
(Gold price)
£967
26 Gold bugs
(Gold price)
£1,280 26 Bond buyers
(IA UK Gilt sector)
£946
27 Cash savers
(Average Cash ISA)
£1,142 27 Bargain hunters
(Worst performing sector of previous year)
£886

Total returns in GBP to 31 Dec 2021

Sources: AJ Bell, FE, Morningstar, ONS, Refinitiv, Bank of England, Cointelegraph, full category definitions available in appendix below

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