Cost of living crisis: which investments have performed the best?

A look at which investments generated the most – and least – money over the past three years.

Soaring inflation over the last three years has made the cost of living ridiculously expensive – but which investments have fared best over this period?

AJ Bell has scrutinised the returns generated by a wide variety of assets to decide the winners and losers since August 2021.

And its analysis reveals that some will have made bumper profits over this time, while others will have lost investors a small fortune.

Ready to invest but want to shield your returns from the taxman? Open a Stocks & Shares ISA with Hargreaves Lansdown now.

Biggest winners: Gold and Bitcoin

The biggest winners since late summer 2021 have been gold and Bitcoin, both of which will have made money for investors.

Gold has made good on its promise as an inflationary hedge over the past three years, carving out a healthy real return for investors, according to Laith Khalaf, head of AJ Bell’s investment analysis.

“That’s despite rising interest rates, which should in theory take the shine off the precious metal,” he said. “The economic and geopolitical uncertainty of recent years has helped propel gold upwards.”

Bitcoin, meanwhile, has seen any perception of it as an inflation hedge challenged by “wild swings” in valuations.

Research compiled by the Bank of International Settlements estimates that around three-quarters of Bitcoin buyers between 2015-2022 were likely to have lost money.

“As ever, gold remains worthy of consideration as a portfolio diversifier because it behaves differently to other asset classes, but it shouldn’t make up more than 5 to 10% of your portfolio at most,” added Khalaf.

The table below shows how much the best-performing assets generated over the three years to August 12, 2024, and what would have happened to the value of a £10,000 investment into them made back in August 2021.

Source: AJ Bell, Bank of England, FE, ONS, Cointelegraph. Total return in GBP to 12 August 2024, CPI and cash returns to July 2024.

Biggest losers: Cash and gilts 

Interest rates may have risen sharply over the past three years but the average Cash ISA has endured a 12% real loss over this period.

This means anyone who had put £10,000 into one of these accounts would now be left with a pot worth £8,802, after accounting for the effects of inflation.

Khalaf explained: “That’s partly because cash rates have only risen gradually, and partly because not all accounts are offering competitive rates.”

He also pointed out that UK Gilt, investors were among the biggest losers from the inflationary spiral as low interest rates and Quantitative Easing pushed up government bond prices for over a decade.

“In real terms, gilts have lost over a third of their value in the past three years,” he said.

“This has had knock-on effects on diversified strategies that invest in gilts, such as 60-40 funds or mixed asset funds more generally.”

The table below shows how much the worst-performing assets generated over the three years to August 12, 2024, and what would have happened to the value of a £10,000 investment into them made back in August 2021.

Source: AJ Bell, Bank of England, FE, ONS, Cointelegraph. Total return in GBP to 12 August 2024, CPI and cash returns to July 2024.

Ready to invest but want to shield your returns from the taxman? Open a Stocks & Shares ISA with Hargreaves Lansdown now.

Global and UK shares

Of course, many investors will have had exposure to global and UK shares over the last three years, so how have they performed? 

According to Khalaf, the good news is that both the global and domestic markets managed to stay ahead of inflation – which was quite an achievement. 

“The FTSE 100 in particular has stood up well, and its performance is in line with the global stock market,” he said.

The biggest winners have been Rolls-Royce Group, Centrica and 3i Group, while the worst performers have included sports betting company Entain, Burberry Group and Prudential.

The table below shows the best and worst-performing shares on the FTSE 100 in the three years to August 12, 2024, and what would have happened to the value of a £10,000 investment into them made back in August 2021.

Source: AJ Bell, Sharepad. Total return in GBP to 12 August 2024.

The information included in this article does not constitute regulated financial advice. You should seek independent, professional financial advice before making any investment decision.

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