Performance of Asset Classes Since 1971

It's worth looking at the performance of different asset classes since 1971. It will provide some perspective on portfolio diversification and exposure to undervalued assets.

The chart below from the World Gold Council gives the performance of asset classes.

Not surprising that emerging market stocks have been the best performing asset class with an average annual return of 13.8%.

U.S. equities have also performed well with an average annual return of 10.9% during this period.

Gold is not behind equities with an average annual return of 10.6%.

However, commodities have delivered only 0.5% annual return since 1971. Commodities are indeed one of the most undervalued asset classes.

In terms of portfolio allocation, exposure to equities is the must. Gold is also an important asset class with higher inflation likely in the coming years.