Many a times when I catch up with friends in social gatherings or for drinks one topic that we often land upon is that of investing, and more specifically of the returns we get from our investments. Depending on the performance of the market or that of the specific investment the mood could be jovial or sombre. Very often people also bring up investment ideas they heard of but are not very familiar with. Sometimes it is the latest buzzword, or a meme that is trending. For instance, last year was the year of meme stocks and SPACs, and cryptocurrencies. People want to know what these are. People want to know if they should they invest in these. If that question comes my way, my typical response is to give my perspective on the concept and ask them the do their own research when it comes to investing or to have a talk with their financial advisor.

But then once I leave those gatherings and start working on my own investments, some of those questions come back again to me. These questions inform me. They lead me to investigate the subjects further. They lead me to new discoveries and most often they lead me to better decision-making.

Once such question that keeps coming again and again is:

What return should I expect if I put my money in such and such?

Such and such being a specific security. So, I decided to take that question up and turn it on its head and investigate. The restructured question I had was this:

If I had a million dollars ten years ago, where should I have invested that money to get the most return?

To find the answer to this question I took up a few different types of securities and pulled up the data on their returns over the last 1 year, 2 years, 5 years, and 10 years. The point is that depending upon the time-range I would have received different level of returns. Each instrument obviously has a different risk and return profile. And most important to note is that when we do such a calculation, we’re depending upon hindsight which is 20/20 - meaning that past performance is not going to be representative of future potential. Anyway, the information found is pretty revealing. Thus, I wanted to share it here in the table below.

Note: The calculation is done based on average historical price at annual level - so will not be reflective of current market price.

The table is self-explanatory, but some commentary should help.

Setup

The selected securities span a wide spectrum - from relatively risk-free and low returning treasuries to mid-risk equity indices, to high-beta stock like MRNA to hyper volatile crypto currencies to major commodities and complex strategies to selected currencies. The hope is that these would provide a wide variety of outcomes.

Conclusion

So, what’s the finding?

As you can see above, treasuries and low beta stocks (with yield) returned the least, but their returns were relatively stable. In a low inflation environment that is good, it protects your money’s value and perhaps even adds a dime on top of that. But they may not provide you sufficient protection when inflation soars. In such an environment these may in fact become instruments that end up making you lose money at a constant rate. Although that may still be better than holding cash. Alternative complex strategies come closer to these securities with managed risk (dependent upon the performance of the manager) and regular yield generation, at a decent level that may be sufficient to beat decently high level of inflation.

Stocks and stock indices (like S&P500 and NASDAQ Composite) have performed in a similar pattern. Indices obviously performing at Beta while good selection of stocks and entry and exit at the right prices have resulted in humongous returns - MRNA at one point returning 1267% in 2 years and AAPL returning 719% in 10 years.

• 1 Million dollars invested in S&P 500 index (perhaps via an index tracking ETF like SPY) back in 2012 would have made you an additional 2 million, 361 thousand dollars.

• 1 Million dollars invested in NASDAQ composite index (perhaps via an index tracking ETF) back in 2012 would have made you an additional 3 million, 788 thousand dollars.

• 1 Million dollars invested in a high growth company like Apple (AAPL) back in 2012 would have made you an additional 7 million, 188 thousand dollars.

• 1 Million dollars invested in a steady earnings generator such as a utility company like Bell Canada Enterprises Apple (BCE) back in 2012 would have made you an additional 799 thousand dollars via a combination of capital appreciation as well as dividend yield generation.

• However, if you were lucky enough to spot a treasure such as Moderna (MRNA) early on you would have made a cool 12 million, 699 thousand dollars in just 2 years. This company has not existed long enough in public markets to allow us to see the return potential in the 5 year to 10 year time horizon.

Cryptocurrencies have been following a pattern that is similar to a very highest beta stock, perhaps multiplied by X factor (esp. if you start calculating returns from around the time of the cryptocurrency’s inception). A million-dollar investment into BTC for instance could have made you a billionaire, many times over.

• Let’s start the crazies with Bitcoin. 1 Million dollars invested in Bitcoin (BTC) back in 2012 would have made you more than 9 Billion dollars (yes, billion with a big B). That’s not all, if you had invested the same one year before that (in 2011) it would have made you 97 Billion dollars. All that being said, practically speaking there may not have been as many coins in circulation back in 2011 for you to be able to buy.

• Etherium (ETH) hasn’t existed long enough for us to be able to calculate the 10 year return performance. But in the last two years, you would have been able to make an additional 9 million dollars, 574 thousand in ETH.

Commodities tend to follow a return pattern that is all over the map - they have their peaks and throughs, sometimes lasting decades. They appear to be great instruments from a trading perspective.

• In 10 years you would have only made an additional 120 thousand by investing 1 Million dollars in Gold.

• And you would in fact have made a loss of 19 thousand by investing in Oil. The paltry returns in Oil and Gold in the 10 year range though gets eclipsed by the returns in the 5 year range, which is 484 thousand and 814 thousand respectively for Gold and Oil. The result is because of the inflationary peak we saw back in 2012 and now in 2022 while a through back in 2017.

Finally, when it comes to currencies, in the past decade the USD would have provided one the best protection - gaining between 16% against EUR, 26% against CAD and 41% against INR. By the looks of that, even by keeping one’s money (from outside US) in USD, they may have secured a return that is higher than a low return treasuries.

• If you had taken 1 million Indian Rupees (or 10 lakh Rupees as per the lingo in India) and converted that into US dollars back in 2012 and then converted that back into Indian rupees today, you would have made more than 4 lakh Rupees just out of these two conversions. Whether this trade would have been profitable or not is a different matter - in the last 10 years inflation rate in India has been much higher as compared to the US. So, your 14 lakh Rupees in 2022 may actually be worth less than 10 lakh Rupees back in 2012.

• The situation is somewhat better when it comes to Canada, but not by much - Canadian Dollar has also fallen by about 26% as compared to US dollar. A longer term inflation (especially in energy prices) could though reverse the course.

• Euro has done somewhat better as compared to the Canadian Dollar, but has also fallen, but only by about 16%.

Final Result

Now looping back to the original question I guess if return is the only concern (and with the benefit of hindsight) I have to admit that Bitcoin is definitely the winner while Moderna and Etherium are also looking very promising (but we do not have full 10 years of data for these two since they have not been in existence or in public markets for that long). Here is the full list in order of returns if we look at it for the last 2 years (for which we have market data for all analyzed securities):

• Moderna stock (MRNA)

• Etherium (ETH) cryptocurrency

• Bitcoin (BTC) cryptocurrency

• Crude Oil

• Apple stock (AAPL)

• S&P 500 index-based ETF

• NASDAQ 100 index-based ETF

• BCE stock (BCE)

All in all though what I can say is that there are different securities providing different returns and they come with different risks (sometimes meaning volatility). It is up to us to do our research, and understand our needs and comfortability and select the best vehicle for the purpose.

DISCLAIMER: This post is not an investment advice or any recommendation of any investment tool. Your personal circumstances may be different, and your risk appetite may vary. Please do your own research and consult your financial advisor before making any investment.