Last 10 years underline the importance of diversification – RBC Brewin Dolphin analysis

You have much more chance of winning the EuroMillions than picking the single best-performing asset class from seven choices over a decade

After several years of stock market volatility, diversification is more important than it has ever been, according to RBC Brewin Dolphin.

The wealth manager said that the odds of selecting the single best-performing asset class from a set of seven categories over 10 years are one in 282 million. That figure is twice as high as your chances of winning the EuroMillions jackpot – one in 140 million.

For the full set of 11 asset classes tracked by RBC Brewin Dolphin, the odds of picking the top performer for 10 years in a row increase to one in 25 billion.

Over the last 10 years, eight different asset classes have occupied the top spot, with commodities the top performer in both 2021 and 2022. However, commodities also performed worst during 2014, 2015, 2017, and 2020, underlining the volatility that comes with individual categories.

All the asset classes tracked – with the exception of commodities, cash, and UK equities – delivered negative returns during 2022. Even then, cash and equities had very low positive returns at just 1.4% and 0.3%, respectively – well below inflation, making them negative in real terms.

The spread in performance – the differential between the best and worst performing asset classes – averaged 41.15% over the past decade. Last year saw the biggest gap between the best and worst performers, at 56.80% (+41.90% for commodities and -14.90% for commercial property).

Rob Burgeman, senior investment manager at RBC Brewin Dolphin, said: “If you’re investing, you need to be in it for the long haul. We often say that five years is the minimum time horizon, but in reality you want to be looking at more like 10 years or ideally longer. As the old saying goes, it is time in the market, not timing the market that makes the difference.

“The spread in the performance of asset classes over the last decade highlights the near impossibility of being able to predict what will happen in the future. That is why we advocate diversification for investment portfolios, which ensures you see some – but not all – of the benefit of what does well, while protecting yourself against the worst effects of the laggards at any given time.

“A professional adviser will be able to guide you through how to construct a portfolio to match your financial objectives and appetite for risk. As the last few years have shown, what is in favour today can easily become massively unpopular tomorrow, and the right spread of exposure to different assets will make sure you remain focussed on your long-term goals and shield you from short-term noise.”

Asset class total return performance 2013-2022:

Source: Bloomberg

Disclaimers

The value of investments can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Performance is quoted before charges which will reduce illustrated performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Financial Services Commission. Registered Office: 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales company number: 2135876. VAT number: GB 365 3456 40.

– ENDS –

PRESS INFORMATION

For further information, please contact:

Peter McFarlane peter.mcfarlane@framecreates.co.uk / Tel: 07412 739 093

Richard Janes richard.janes@brewin.co.uk / Tel: +44 (0) 20 3201 3343

NOTES TO EDITORS

About RBC Brewin Dolphin

RBC Brewin Dolphin is one of the UK and Ireland’s leading wealth managers and traces its origins back to 1762. With £53.8* billion in assets under management, we offer award-winning, personalised wealth management services from bespoke, discretionary investment management to retirement planning and tax-efficient investing.

Our qualified investment managers and financial planners are based in 33 offices across the UK, Jersey and Republic of Ireland. They are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.

As part of Royal Bank of Canada (RBC), we are now able to draw on the strength of a global financial institution to continue to improve the service we provide to our clients and drive further innovation across our business.

*as at 30th April 2023.

Disclaimers The value of investments can fall and you may get back less than you invested. RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444).