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Below are listed the true returns for 11 of the most popular investments for beginner investors.
We made this to demonstrate truly amazing results. Which even beginner investors can make. Always consider that past returns are not an indication of future success. But using research and logic we can infer into the future.
1. Hedge fund returns.
Let’s start with the largest hedge fund. Ray Dalio’s Bridgewater Associates. It has averaged a return of 11.5% per year. According to a study by Yale and NYU, the average return for offshore hedge funds is 13.6%. Some years are better than others. And some hedge funds are better than others. But the returns of hedge funds are simply disappointing. Some even have negative returns. And that’s thanks to bad returns plus high fees. Also, many hedge funds require a minimum investment of 1 million dollars. Therefore excluding many investors. Beginner investors mainly. Also, an indication of how bad hedge funds perform is the rate of closures. In fact, over 20% of the new hedge funds close their operations.
2. Robo-adviser returns.
The average return for Robo-advisers is 2%. Yes, 2%, you read that right. Some might be 4%. Even worse, some don’t even return 1%. Truly bad results indeed.
3. Gold returns.
Gold’s annual return is 10.44%. And it’s been the safe haven for thousands of years. Gold is still a good way to store your wealth. Not multiply your wealth. In the modern age of cryptocurrencies and high growth stocks, gold simply looks like a bad investment. To demonstrate Gold has a market cap of around 10 trillion dollars. To 10X your investment gold must achieve a market cap of 100 trillion Dollars. And the chances for that happening is slim to none. Gold has worked in the past. But the modern world requires modern investment solutions. Gold works for jewelry, but not much else. Therefore we must look somewhere.
4. S&P 500 Index returns.
Currently a very popular investment indeed. The largest index in the world of course. Also the benchmark for the US economy. People love to recommend young investors just buy the S&P 500 index. The actual returns are around 10% per year. Yes investing in the S&P 500 is low risk. But at what cost? The greatest cost. Gains. Diversification might have worked in the olden days. For instance, when information was sparse and hard to come by. But in the modern age, we have ample information. And immediate information. To illustrate, investing in 500 companies is like having 500 Facebook friends. Investing in a few companies is like a true friendship. More on that later on.
5. Savings account returns.
Also called high yield savings accounts. Ironic as they are everything but high yielding. In fact, interest rates have fallen steadily year on year. Today interest rates are 0%. That means that you are actually losing 2% per year. Thanks, inflation! This is not by accident. Governments are incentivizing you to invest in something useful. Rather than sitting in a bank account getting devalued. In fact, countries like Japan even have negative interest rates. Thus, no need to use our investment calculator on this.
6. Mutual fund returns.
The top mutual funds return on average 4% per year. Yes, 4% for the top mutual funds. Meaning the average mutual fund returns are even worse. Definitely room for improvement.
7. Real estate returns.
According to NCREIF the annual returns for US real estate is 9.4%. Meaning US real estate slightly underperforms the S&P 500. Also investing in real estate usually requires large investments. However, it is a solid, low-risk investment that you can make with a loan. You will also have a roof over your head. Although the investment is not truly passive. Not to mention you are in debt. You need to rent it out. There is upkeeping. And property tax. And insurance costs. Fortunately, if you don’t want around 10% return annually, better investments can be made.
8. US Bond returns.
The 2-year US bond yield is around 0.1%. The 30-year yield is below 2%. Second worst investment after holding cash and waiting for inflation to eat your funds away. Therefore, no need to use our investment calculator on this one.
9. ETF returns.
Or exchange-traded funds. These are funds that are bought on exchanges. The worst performing ETFs returned around -30% in 2020. On the other hand, the best performing ETFs managed to return over 180% in 2020. And the average is around 10%. Ark Invests innovation fund is the one to look for. Ark Invest has demonstrated truly excellent returns every year. They invest in technology and disruptive innovation. Stocks and cryptocurrency. Ark-Invest actively manages 4 more ETFs. All of them have a history of overperforming. And the CEO Cathie Woods is considered a true visionary by many investors. Certainly, they leave their returns to do the talking.
10. Stock returns.
The stock market is the biggest creator of wealth ever. And investing in stocks has never been easier or cheaper. Simply choose an online broker like Robinhood, press buy, and be patient. Above all remember young padawan, selling introduces risk. Simply buy a great stock and hold. The highest growing stocks are technology stocks. Disruptive technology stocks. Take for example Amazon. Since 1997 Amazon stock has returned around 6900% per year. The stock has risen from 2$ to 3300$. Or it has increased by 165000% in 14 years We know what the next Amazon is. Companies that follow the same strategy. Disrupting legacy industries with innovation to be precise.
11. Bitcoin returns.
From 2016 to December 2020 Bitcoin returned 1300% per year. Bitcoin rose from 400 dollars to 28 000 dollars. And this is in spite of the 2017 bubble and subsequent bust. Bitcoin got a little ahead of itself in 2017, yes. But since then it has matured. Moreover, institutions are starting to buy Bitcoin. Institutions usually invest billions of dollars. In fact, institutions are buying faster than the miners can mine. The price simply follows supply and demand. But the supply is limited. 21 million. And the demand is only increasing. Therefore the price keeps climbing. The trend is very easy to spot. And lastly, bitcoin’s potential user base is everyone. There are 3.5 billion smartphones. And the number is rising. None of them can send actual gold. However, all of them can send Bitcoin.
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