Bitcoin and Tesla soar but cash and gold flop – which assets will make you richer in 2022?

Victoria Scholar gives advice on interests rates and FTSE

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Stock markets have flown this year with the FTSE up more than 12 percent and the US S&P 500 soaring 25 percent. Electric car maker Tesla and Bitcoin have soared again. Gold and cash flopped.

Personal finance comparison site Finder.com has tracked the performance of five top asset classes over the last year, to see how each fared.

It invested a virtual £1,000 into the UK’s most popular stock, investment fund and cryptocurrency, along with gold and an easy access savings account. And the winner this year is…

Bitcoin, for the second year in a row. Someone who invested £1,000 at the start of the year would now have £1,622.

That’s a rise of 62 percent, despite a spectacular fall of around 25 percent over the past six weeks. When the Bitcoin price peaked at almost $70,000 in early November, that £1,000 was worth a staggering £2,231.

Bitcoin did even better in 2020, when it would have turned £1,000 into £3,919.

Outlook: Cryptocurrencies are incredibly volatile and nobody has any idea how Bitcoin will perform in 2022, warns Victoria Scholar, head of investments at Interactive Investor. “Only invest money you can afford to lose.”

Tesla was the most popular stock in the UK in 2020, and anyone who invested £1,000 in its shares at the start of 2020 would now have £1,364, an impressive rise of 36 percent.

The stock is risky, though, as controversial owner Elon Musk’s erratic tweeting can wreak havoc on his own company’s share price.

Outlook: Tech juggernauts like Tesla could struggle in 2020 as the era of cheap money draws to a close, cautions Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Fundsmith Equity, the investment fund run by the hugely respected manager Terry Smith, is the UK’s most popular fund and lived up to its mighty reputation by enjoying a solid 2021. It rose more than 20 per cent, turning £1,000 into £1,209.

Fundsmith invests in a selection of top global companies such as Microsoft, L’Oréal, Intuit, Paypal and Estée Lauder.

Outlook: Few would bet against Terry Smith repeating his success in 2022. The UK’s most popular fund manager has delivered an impressive average annual return of 19.54 percent over the last 10 years.

Cash had another disastrous year. The big high street banks all offer easy access savings accounts paying a meagre 0.01 percent. That would have turned £1,000 into £1,000.10.

In other words, savers would have made just 10p.

Outlook: The Bank of England increased interest rates to 0.25 percent in December but that is yet to feed through to higher savings rates. With inflation set to top six percent next year, the outlook for cash is worse than ever.

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Gold is only investment of the five that would have left people with LESS money than they started with. Someone who invested £1,000 on January 1 would have £980.54 today, a loss of £20, Finder calculates.

Outlook: Many investors believe that gold is due a good year after recent struggles, said David Jones, chief market strategist at Capital.com. “It could do well if the economic bubble finally pops.”

Finder’s head of research and communications Matt Mckenna said 2021 was a stellar year for riskier investments like Bitcoin and Tesla but adds: “Past performance is no guarantee of future success.”

One year’s winners can quickly turn into the next year’s losers, so it is important to spread your money across a range of different asset classes, so you do not lose everything in a crash.

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