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Best performing sectors of the decade – and why you might want to avoid them

Jonathon Curtis looks at which investment areas delivered the greatest gains over the past ten years, and reveals something that might make you think twice before investing in them.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

As we prepare to welcome the turn of a decade we thought we’d take the opportunity to look back over the past ten years and see which sectors have benefitted investors most. As you might imagine, there are some pretty niche ones at the top of the rankings. Had you invested a decade ago in Thai industrial transportation, South African media or Dutch technology hardware, you’d be sitting on many times your money today.

But let’s be honest. None of us has such incredible foresight. Not only that, it’s often very difficult to invest in such esoteric areas. Instead, let’s focus on the decade’s top performing sectors you could consider investing in with an index tracker fund.

A word of caution before we do though. As we’ll see later on, just because something’s done well (or poorly) in the past doesn’t guarantee it will perform the same way in the future. In fact, sometimes the best performers end up struggling, and the worst ones can go on to take the charts by storm. That’s why you shouldn’t invest on past performance, it isn’t a reliable guide to the future. Remember investments can go up and down in value and you could get back less than you invest.

Top ten sectors of the decade

Sector % growth
Global Technology 433.6
USA 338.6
Global Health Care 320.5
North America 316.2
FTSE 250 (ex Investment Trusts) 222.9
Developed World 220.9
Global Small Cap 219.5
Global 210.2
Global REITs 186.7
Japan 140.1

Past performance is not a guide to the future. Source: Lipper IM *to 17/12/2019

By far and away the best performing sector was Global Technology. That shouldn’t come as much of a surprise. The rapid growth of big US tech companies like Facebook, Alphabet (Google) and Microsoft, have dominated both financial headlines and global stock markets in recent years.

The US in general was also the best performing of the major markets. As it makes up the bulk of the North American, Developed World, and broader Global indices, they grew significantly too.

What might shock some investors though is how well one of our own markets has done. Since 2016 Brexit has clouded many investors’ view of the UK stock market, but over the longer term the FTSE 250 (excluding investment trusts) was a top performer. Japan might also be another surprise to some, but it too crept into the top ten.

Also on the list are some more specialist areas, such as Global Healthcare, Global Smaller Companies and Global Real Estate Investment Trusts (REITs). Again, these are all dominated by the US and so have benefitted from the strength of the world’s biggest economy.

Hold your horses

Before you think about investing in any sector, consider this – only one from the list (the FTSE 250 ex investment trusts index) featured in the previous decade’s top ten best performers. If you’d based your portfolio on what had returned the most in the decade from 2000 then you’d have invested in emerging markets, Asia Pacific (ex Japan), UK equity income and mid-caps, global bonds, and Gilts. In other words, you would have missed out on nearly all the best performing sectors of the last ten years.

By basing your investments on past returns, it’s almost certain you wouldn’t have invested in this decade’s best performers. That’s because both the Global Technology sector and the US stock market made losses in the previous decade.

Best performing sectors vs their performance last decade

Past performance isn’t a guide to the future. Source: Lipper IM *to 17/12/2019.

**Data for the previous decade not available

That doesn’t mean nothing from the list will do well in the next ten years. Some could carry on their strong growth. But others might stall or fall back and there are no guarantees. If history is anything to go by, the list is likely to look different a decade from now.

So where should I invest?

It’s nearly impossible to consistently know which sectors and regions will do best from one period to the next. We think it’s sensible to remove the guesswork and invest in a broad range of them and invest for the longer-term. That helps increase your chances of having exposure to some strong performers of the future. It also helps spread the risk of one or two sectors in your portfolio struggling.

Index tracker funds are a simple and convenient way to invest in stock or bond markets and sectors. An index fund’s performance aims to closely track an index by replicating every share or bond on that index. That makes them easy to understand and they’re a low cost investment option. There’s a wide variety available, covering all the major sectors, and some specialist ones too. You’ll find our favourites on the Wealth 50.

This article is not personal advice. All investments can fall as well as rise in value so you could make a loss. If you are unsure whether an investment is right for you seek advice.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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