Reckon you can pick the best-performing individual company on the stock market? You’ll think again when you consider the odds of even choosing which asset class will provide the best returns over a reasonable length of time.
Selecting the asset class from a list of eight with the highest return each year over a decade means facing odds of as high as one in 107 billion, according to calculations by Murphy Wealth.
That means you are just as likely to win the National Lottery jackpot nearly 2,400 times, or scoop £1 million from Premium Bonds on 41 occasions.
Over the past 10 years, the wealth manager’s analysis of Dimensional data found five different asset classes have been the top performer in any calendar year – ranging from emerging market equities to global real estate.
UK equities were the best performer last year returning 25.8%, while developed market equities (ex UK) were the best performer during 2023 and 2024, with returns of 17.8% and 21.8%. Global real estate has also occupied the top spot twice in recent years, during 2018 (1.1%) – when returns were poor across the board – and 2021 (33.7%).
Emerging markets equities took top spot three times in the last decade, returning 33.1% in 2016, 25.8% in 2017, and 15% in 2020. However, they were also one of the most volatile asset classes, featuring bottom twice with returns of -8.9% in 2018 and 4% in 2023. Neither global credit, short-term government bonds, or UK treasury bills featured in the top spot at any point.
The spread in performance – the differential between the best and worst performing asset classes – averaged 23.7% over the past decade. The biggest gap between the best and worst performers was in 2021, at 36.1% (33.7% for global real estate and -2.4% for government bonds), and the lowest was 2018 at 10% (1.1% for global real estate and -8.9% for emerging market equities).
Adrian Murphy, CEO of Murphy Wealth, said: “People often like to think they can pick out the best-performing company on the stock exchange, but these figures show it’s a fool’s game – particularly during uncertain periods like the one we are going through at the moment. Trying to pick the stock or even market with the highest return is speculation, rather than investment, even on a short-term basis. Five years is the minimum time horizon for investing, but realistically a decade or longer is better – and the odds of selecting the best performers over that type of period are astronomical. Time in the market will always beat timing the market.
“The spread of performance of the different asset classes tracked over the past decade underline the fact that you are never protected with any single type of investment. This is one of the main reasons we recommend having a diverse portfolio to ensure you have exposure to a range of companies, geographies, and markets. While that means you won’t see all of the benefit from one company or theme going on a tear, it also means protecting yourself against potential losses from the worst performers.
“What is in favour today can easily become massively unpopular tomorrow, and the right spread of investments will make sure you remain focussed on your long-term goals and shield you from short-term noise.”
Figure 1: Total return for each asset class 2011-2025:
