What went well in 2011?

As we look back on 2011, let's do so with a little bit of investing fun and games.  Write the following assets down on a piece of paper and then mark which of these you think performed better than the others in 2011 (to date): 

Shares (Globally):
Cash in the bank
Global Corporate Bonds
Commercial Property
Residential property prices
Industrial metals
Food commodities
Gold
Silver
Government Bonds

There are 11 options.  List them down and write 1 - 11 (1 being the best performer and 11 being the worst performing in 2011, to date)  And then compare your answers with the correct answers below:





Shares
Its hardly surprising, given all the bad news out there. US debt woes, the Arab spring, civil war in oil producer Libya, high inflation, rising unemployment and austerity measures across the worlds that it has spooked the markets.  Let's not forget European politicians.
Only one market has produced a positive return to date over the last 12 months.......Ireland.  a 5% increase.  Admittedly from a low base.  The USA is down approx 5%, European markets are down 17%, The BRIC economies are down 23%.  Even Norway (oil) is down 17%.

Cash
Is it a safe haven in times of economic distress?  Sorry, but the answer is no.  With interest rates on cash finding it difficult to get above 2% or 3% if you are lucky, and inflation at approx 4% (In Italy) then for those savers in cash, you have seen the spending power of your savings drop 1% this year.  Cash is not king, its criminal. Another negative.

Bonds
Global Bonds are up, but only just at 1.1% to date.  The corporate sector is down and the high yielding corporate sector has fallen approx 5%.

Commercial property
The average fund is down 4%

Residential Property prices
Another asset that has gone into negative territory.  Now, I know how difficult it is to assess the property market in Italy, since it has the liquidity of glue and prices stay stubbornly high even when the true value is much less.  However, residential property prices have fallen in 2011.  The best estimate in Italy is approx 5-10%.  In the UK the average house price is down 3.2%.

Industrial metals
Platinum and lead fell 9%, aluminium, copper and tin fell 16%, while nickel fell a hefty 24%. 

Oil
A positive, in all this negative: 3.2% Is this the winner?

Food commodities
Sugar (-1%), Cotton (-5%) and Cocoa (-17%).

Gold
If you guessed Gold, you would be correct.  It has been the obvious winner in 2011.  A rise of 25%

Silver
Silver ran a close second place with a gain of 15%

Government Bonds
OK, it depends on which Government Bonds you had your money in, but based on UK Gilts, you would have seen an appreciation of 13%, and if they were inflation linked, a return of 17% in 2011.

So there you have it, your answers should read:

Gold  1.
Government Bonds 2.
Silver  3. 
Oil 4.
Global Corporate Bonds 5.
Cash in the bank 6.
Commercial Property 7.
Residential property prices 8.
Shares (Globally): 9
Food commodities 10
Industrial metals 11

Some thing to get depressed about?  Well not really.  Actually I think that this shows an important lesson and one which I started advising clients in my early days of becoming a financial adviser: 

There will almost always be places to accrue your wealth and protect your hard earned savings against inflation.  But the key is to diversify your holdings.  A Multi asset portfolio weighted towards the future and NOT the past is how to ensure that you will reap the benefits of appreciation.   

You may be inclined to look to the above results and say 'I told you so, Gold was it!.  That is what I will be investing in next year".  But, you would be wrong to base your future decisions on last years results. 

Take heed !