We’re all on the lookout for the best return on our investments. That’s why you likely look at the table of percentage gains/losses for a stock before deciding whether to buy it or not. Although we mainly focus on stocks, a well-rounded investment portfolio includes smaller allocations to other assets. These can include commodities, bonds, Cash ISAs and potentially cryptocurrency.
Given that it’s advantageous to compare stock returns on a relative basis, how do some of the best growth stock performers compare against other assets so far in 2020? What’s been the best investment?
Run the numbers
For commodities, I’ll choose gold as the barometer. It’s been in the headlines a lot recently, as investors flocked to it as a safe haven. Year-to-date, gold is up almost 30%, currently trading just below $2,000 per oz. For cryptocurrency, I’ll use Bitcoin. This is the most traded crypto out there at the moment. Year-to-date, Bitcoin is up a very impressive 59%.
When it comes to FTSE 100 growth stocks, it’s a bit harder. To avoid being accused of bias, I’ll use an average of a few growth stocks that have got a lot of attention recently. The companies I’m going to use (with the performances in brackets) are as follows. Ocado (86%), Polymetal International (65%) and Flutter Entertainment (29%). The average return from the three is 60%. On this basis, growth stocks take the win!
Growth stock outperformance
The comparison between the three asset classes is hard to pin down exactly. For example, I could have used the copper price instead of gold. Or I could have used the Tezos price instead of Bitcoin. Even the collection of FTSE 100 stocks that I slot into the growth category could be amended. All of these tweaks could have yielded different results, which I acknowledge. But I think it makes the investment point very clearly.
Well-chosen growth stocks offer a great opportunity for investors to make decent returns. Although this is something I mention frequently, it’s backed up when looking at it in comparison to other assets as well. Given all of the noise surrounding gold this year, you may have expected it to be the best investment for 2020. Yet when it comes down to it, a company that’s performing very well has the potential to offer investors returns in excess of other assets, even though it can sometimes sneak under the radar.
What does this lead me to do? I think you should hunt for other growth stocks that haven’t been discovered yet! Or you can look at some well-known growth stocks (such as Rightmove). The sell-off during the stock market crash has left that growth stock at a discount, which I think makes it attractive to buy right now. There are many other great firms out there, if you do your homework.
Diversification is the best investment idea
Growth stocks may have outperformed some other assets, but it’s important to have a diversified portfolio. If you prefer to just own stocks, then mix it up with some income-generating ideas. If you’re happy to hold alternative assets, then by all means look to buy some gold. As past performance doesn’t guarantee future returns, having a balanced portfolio for the rest of 2020 is really the best investment advice you can get!
jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.