This article identifies the regions and sectors from across the globe which have produced the best returns over the last 10 years, as well as uncovering how consistent those returns have been.

Consistency is important because the more prices move up and down the greater the impact on overall performance.

One example illustrates the point. An index which loses 50% in any year needs to double to get back to breakeven, whereas one which falls by 25% only needs to go up by a third to reach parity.

Just because a region or sector has done well over the last decade, doesn’t mean it will be the best performer over the following decade. That said, cycles can often last longer than expected so it is important to identify the underlying drivers.

The prevailing economic landscape, including the level of interest rates, growth and inflation, tends to favour certain types of investments over others. When conditions change big rotations                      can occur.

It should come as little surprise that the technology-heavy Nasdaq 100 is the best-performing major equity index over the last 10-years posting a total return of 371%.

After the Federal Reserve began to hike interest rates in 2022 to fight inflation, however, the technology sector became one of the worst performers because valuations of higher-growth companies are more sensitive to interest rates than lower-growth firms.

Recent investor excitement about the potential for AI (artificial intelligence) has thrust the technology giants into the limelight once again, while technology stocks could also outperform if economic growth slows or the economy goes into recession.

HOW DID WE FIND THE WINNERS?

To narrow down the universe, Shares used Sharepad software to screen for indices and sectors which have delivered a CAGR (compound annual growth rate) of at least 6% per year since 2013.

That is a tough hurdle to overcome, and helped cut the starting universe from hundreds of indices and sectors to less than 20.

The data was then sieved again to identify the most consistent. Only one sector from the starting universe has made a positive return every year and delivered a compound annual growth rate of at least 6%.

That accolade goes to the S&P/TSX Canadian capped consumer staples index, which caps the maximum weight of constituents.

While there isn’t a way to play the Canadian consumer staples market, which is relatively small, there are global alternatives such as the Xtrackers MSCI World Consumer Staples ETF (XWCS).

Staples have historically been a good relative performer during tough times as their revenues and profits are more insulated from falling economic activity.

WHICH ARE THE STANDOUT PERFORMERS?

Surprisingly, the Turkish equity market is the best-performing index over the last decade with a return of 866% which is equivalent to a CAGR of 25% per year.

One caveat to be aware of is that the Turkish economy has suffered a big bout of inflation in recent years which has pushed interest rates up to 30%.

Sky-high inflation, which is running at a 60% annual rate, has had a big impact on the currency (Turkish Lira) causing it to lose value against the pound.

The pound purchased around three Lira in 2013, but today the exchange rate is 33 Lira to the pound. This means the 866% gain on the Turkish stock market would not translate into the same gain when translated back into pounds.

Currency risk and political risk are real concerns when investing in Turkey. But with a growing population, the country could be an interesting place to invest if the government can bring inflation back under control.

For investors willing to take on added risk, the Lxyor MSCI Turkey Acc ETF (TURL) is a relatively cheap way to access large and midcap Turkish companies with an ongoing charge of 0.45%
per year.

There may be concerns currently over the global chip market after the world’s largest contract chip manufacturer TSMC (2330:TPE) asked major suppliers to delay delivery of high-end equipment, but over the long term the sector has rewarded investors.

The Philadelphia Stock Exchange Semiconductor Index, known as the SOX, has delivered a total return of 604% over the last decade or the equivalent of a CAGR of 22% per year.

The index, which is comprised of 30 of the largest US companies involved in the design, manufacture and sale of chips, has also been one of the most volatile with a positive return in just six out the last 10 years.

With AI affecting more industries and technologies, the demand for semiconductors is set to continue and provides a positive tailwind for the industry.

One way to play the chip theme is the HSBC Nasdaq Semiconductor ETF (HNSS) which has an ongoing charge of 0.35% per year.

With the world transitioning towards renewable energy, it is perhaps not surprising to see the solar energy sector among the big winners of the last decade.

The Nasdaq OMX Solar Total Return index has delivered investors a 516% return, equivalent to a CAGR of 20% per year. One way to play the increased investment in the sector is through the Invesco Solar Energy ETF (RAYS).

It is the only ETF which tracks the MAC Global Solar Energy index, which is comprised of 44 stocks. The fund was launched in 2021 and is relatively small with $44 million of assets.

DIVERSIFICATION PAYS

One interesting feature of the best-performing indices is that the FTSE World Index makes the top 12 with a return of 197% or around 11% per year.

This demonstrates the benefit of broad diversification. In other words, rather than trying to pick out the best geographies and sectors it can often be better to have a little bit of everything.

The index measures the performance of around 3,900 large- and mid-cap companies across developed and emerging markets. The Invesco FTSE All World ETF (FWRG) tracks the index for a relatively competitive fee of 0.15% per year.

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