While this is not an anniversary to be celebrated, events of such enormous magnitude as the financial crunch that shook the whole world in 2007 cannot be forgotten too quickly. Whether you don’t put a date to it or don’t consider any particular event as marking the genesis of the crisis, it is widely agreed that the catastrophe began in 2007.
Like all other life changing events as this one, the world has never quite remained the same. The investment landscape for one, has changed. In the years following the crunch, it wasn’t quite clear to many investors what they ought to be doing. While some thought they knew, some were not certain they knew but actually did know, and others preferred to watch from the side lines out of fear and uncertainty. But ten years later, we now know where investors should have put their money. If only we had a time machine.
High yield bonds
Very few investors would have invested in high yield bonds in the aftermath of the crunch, but if more investors did, they would have been enjoying the rewards by now. In terms of interest rates, bonds have gained from the financial crisis. Naturally, investors wouldn’t have gone near them because they are known to be vulnerable when the market is under stress, and what stress could have been worse than that of the 2008 recession?
Over the years, it has been found that the kind of investments that enjoyed the highest cumulative returns have been high yield bonds as indicated by the figures. If you had put your money in high yield bonds right at the start of the crunch in August 2007, you would have seen gains of +216.68%.
Emerging market debt
The next best investment that would have yielded great returns for investors by now is emerging market debt. Recognised as a viable asset class of its own, emerging market debt has proved to be resilient in the last decade after the meltdown as investing in it exactly ten years ago would have seen an investor gain +216.45% on their initial investment.
US equities have also done significantly well over the years generating high cumulative returns, with an investment of ten years yielding up to +209.45% of the initial investment.
Which investments have performed poorly over the years?
The absolutely worst option for investors over the years would have been commodities as they would only have resulted in losses.
The winning formula
The best way an investor would have invested his or her money was by focusing on a diversified portfolio. Of course, you would need super human powers to be able to predict what the numbers would have been exactly, but investing in all asset classes in a long-term fashion would have been the most beneficial move to make. Even as some years were particularly bad for certain asset classes, there was never a time everything was a flop.