Many financial consultants claim, that stocks offer the best performance. Gold bugs contend, that the famous precious metal is without alternative in preserving wealth. And some tech entrepreneurs are convinced, that decentralized crypto currencies are the best long-term investment.

To check, whether such assertions are corroborated by facts, we have taken a closer look at the total return (i.e. price appreciation plus returns from the reinvestment of dividends, interest payments and other income) of various assets since the Great Financial Crisis (GFC) in 2007-09.

We have selected three stock indices (Nasdaq Composite, S&P 500 and STOXX Europe 600) as well as three bond indices (S&P U.S. Investment Grade Corporate Bond Index, S&P Eurozone Investment Grade Corporate Bond Index and S&P Global Developed Sovereign Bond Index). The use of alternative indices would have changed the numbers, but not altered the key message.

With the Dow Jones Global Select Real Estate Securities, we also consider an index for Real Estate Investment Trusts (REITs), as an admittedly imperfect proxy for real estate prices. Finally, we include prices for gold and Bitcoin. This is not fully consistent, as both are individual assets and not asset classes, such as precious metals or cryptocurrencies. But as both dominate their respective groups, we think this is justified. 

Except for the STOXX Europe 600 and the S&P Eurozone Investment Grade Corporate Bond Index, all indices are based on assets denominated in USD. We did not adjust for EUR-USD exchange rate fluctuations, as we prefer to look at the ‘local’ performance. Nevertheless, we need to point out, that since the beginning of 2007, the Euro has depreciated against the USD by 18%. Consequently, in dollar terms the overall yield for both Euro indices would have to be reduced accordingly.


Overall performance

Most people just look at asset performance over a short period of time, such as year-to-date, one year or five years. Looking at a longer period is made difficult by the fact, that most financial websites and brokerages only provide data for the last 10 years. This is insufficient. To get a proper understanding of asset price performance, you have to look at prices over a full business cycle. This is best done by comparing the lowest price at the beginning of the cycle, with the lowest price at the end of the cycle.

The current business cycle started at the bottom of the GFC in 2007-09. With the current corona crisis just getting started, we certainly haven’t reached the end of the current cycle yet. Nevertheless, taking a closer look at the performance up till now, provides some meaningful insights.

Bitcoin, which on average rose 102% per year from 0.76 USD to 9,328 USD, has certainly outperformed all other assets by a wide margin. Stock indices have provided mixed results. While the Nasdaq, that comprises technology and innovation companies from all over the world, generated an excellent 611%, the STOXX Europe 600 returned a mere 103%. Bonds in general have provided much lower returns. While US investment grade bonds still generated a respectable return of 103% in total or 5.4% p.a., global government bonds only yielded 51% and 3.1% respectively. Bonds were beaten by REITS, that managed to generate a total return of 137%. It is interesting to note that gold, that provides neither interest payments nor any other income, has outperformed REITs, bonds and even some stock indices with a total return of 145% or 6.9% per year.

Does the above mean, that Bitcoin is the best performing asset? No really. First, nobody managed to purchase all assets of his or her portfolio at the respective lowest price during the GFC. If you bought all or part of the assets later, then it is important at what price you bought them. Second, we are not yet at the end of this business cycle and given the current crisis, major changes are likely to occur in the coming months. At the end of the current business cycle, returns and rankings might deviate significantly from what is shown in the chart above.

For a comprehensive assessment of asset performance, we need not only look at overall return, but also at volatility and performance during a crisis.



There are sophisticated statistical formulas to calculate volatility. They are certainly important to financial professionals and day traders, but have only minimum meaning to the average private investor. We therefore only consider two simple measures, that are easy to understand: Maximum drawdown in the period 2007 – 2020 and decline of current price from peak value in the period 2007- 2020.

The chart above reveals, that Bitcoin has been the worst asset in terms of volatility. Between December 2017 and December 2018, Bitcoin crashed a stunning 83% from USD 19,497 to USD 3,242. Ups and downs by 20%, 30% or even more are not unusual for Bitcoin and its current value is still 52% below its 2017 peak. Those who bought most of their Bitcoin at the end of 2017, are still sitting on substantial losses today.  

Gold’s performance has also been anything but immaculate. It peaked in September 2011 at USD 1,895 and then fell by 45% to USD 1,049 in December 2015. Since then it has reversed and is now only 8% below its previous top.

REITs and stocks have also suffered large slumps of between -55% and -74%. Their current prices are between -39% (REITs) and -8% (Nasdaq) from their all-time high. The price fluctuation for bonds is much lower. But drops of -13% to -7% for industrial grade corporate bonds show, that they don’t always generate stable returns.


Crisis behavior

Many investors focus on potential upsides, while underestimating the effects of potential downsides. This can have disastrous consequences. If the price of an asset crashes by 50%, it needs to appreciate by 100%, just to get back to the original price. It is therefore advisable, to take a closer look at the behavior of various assets in times of crisis. In the chart below we exhibit for each asset the largest drop during the GFC and the March 2020 crash as well as the year-to-date return.

It is obvious, that the recent decline in March 2020 has been much more subdued than in 2007-09. While stocks were down by -59% to -55% during the GFC, the March contraction was comparatively mild with a drop between -36% and -30%. Stocks have largely profited from aggressive government and central bank intervention, and YTD performance is now between -1% for the Nasdaq and -22% for the Stoxx Europe, despite worsening fundamentals. Future performance will to a large extent depend on whether the authorities will succeed in propping up stock prices. If not, massive losses can occur.

The March 2020 performance of bonds was more or less in line with the performance during the GFC. However, considering that many companies and governments are more heavily indebted today when they were in 2007, large-scale defaults cannot be ruled out. If they take place or if interest rates start to rise, bond prices might go into free fall.

REITs have also performed better than during the GFC, but the index is still down by -32% compared to the beginning of the year. In view of growing problems among companies and consumers, a decline in the future is possible, except if authorities intervene on a massive scale.

The correction of the gold price was less severe than during the GFC. A further drop can therefore not be ruled out. The same applies to Bitcoin. As it was only launched in 2009, no data is available for the GFC. However, as the current price is 188% above the 2018 low and as Bitcoin has a history of high volatility, another (temporary) downturn is more likely than not.

So far only Bitcoin (+30% since the beginning of the year), gold (+15%) and Global Sovereign Bonds (+4%), have provided positive returns since the beginning of the year. But it is still unclear, whether they will maintain their ‘safe haven’ status until the end of the current business cycle. Especially the price development of Bitcoin, which might hold some positive or negative surprises, will be interesting to watch. And Global Sovereign Bonds might turn out not to be as safe, as the majority of investors currently assumes.


In summary, there is no clear winner. Bitcoin has put up a spectacular performance, but its price is highly volatile. As an asset, that is only 11 ½ years old, it still has to prove its long-term potential. It can certainly soar further, but if can also crash close to zero. Gold’s return is less than that of Bitcoin, but its volatility is much lower. As it has been a store of value for thousands of years, it should perform well during the current crisis. Stocks have so far provided very good returns, but without massive intervention by the authorities, their overall return would be much lower than currently shown. Further decline can’t be ruled out.

What else can we learn from the above?

  • Don’t trust performance rankings, that don’t evaluate asset prices over a full business cycle. Sell-side analysts like to present charts, with the promoted security being the top performing asset. They get there by carefully choosing the ‘right’ assessment period. If you chose another period, you often end up with the promoted security being at the bottom of the list
  • Price volatility can have a huge impact on the performance of your portfolio. If you buy the top performing asset at a high price and sell it at a low price, your overall return will be insufficient or even negative (e.g. down to -52% compared to a maximum of +2,552,168% in the case of Bitcoin)
  • Assets perform differently in boom and bust periods (e.g. REITs are down by 32% YTD, while gold is up 15% and Bitcoin 30%). In theory it makes sense, to increase the share of some assets in the growth period, and decrease it in the contraction phase (and vice versa). The problem is, that nobody knows for sure, where we are at a given time in the business cycle. Timing the market is something, that even experienced professional investors often get wrong

There is no single asset or asset class, that is assured to outperform all others over the next decades. Today’s winner can be tomorrow’s loser. Therefore, it is important not to put all your money into one basket, but rather invest in a diversified portfolio. If some assets go down, others need to offset this. Eventually, only the performance of the portfolio matters.  


Disclaimer: The above is for informational purposes only. It is not an offer or advice to buy or sell any products or services. LBB and its owner do not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.


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