It is interesting to see how different investment categories have performed over the past five years, from more conservative deposits to investments in stock markets. The following table summarizes the annual returns from seven different investment instruments, including not only investments in financial markets, but also real estate and loans to companies. The sources for investment returns in global stocks, bonds, real estate and deposits are the most popular index funds in these investment categories.
As can be seen, the best return over the past five years has been provided by investments in global stocks (with an average return of 12.48% per year), but the Baltic stock index is not far behind, showing a high return of 9.44%. However, it should be noted that the return on investments in stocks has been very volatile (17.31%). A large range of return fluctuations means higher risk for financiers. In this regard, the largest price range has been for Baltic stocks (20.03%), followed by the fluctuation of income from investments in real estate (18.8%) and global stocks (17.31%).
In general, real estate, which is traditionally considered a safe long-term investment, has been quite unpredictable during this period with an average return of only 0.46% and large fluctuations. In turn, bonds, which have historically been a safe haven for investors, have even shown a negative average return in this five-year period (-4.09% for investment-grade bonds and 2.28% for speculative bonds), but small fluctuations (around 10%). Therefore, it can be said that bonds are a safer investment solution than stocks, but at the same time these small fluctuations have yielded around 0 or negative returns.
It should be noted that investments in financial markets are not the only investment option, so this review also includes corporate loans through the Capitalia crowdfunding platform. Interestingly, such loans have brought investors the second best return (10.97%), following global stocks, and have provided the lowest return volatility (1.52%). Corporate loans do not have daily stock prices and constant value fluctuations, so investing in such an instrument could be suitable for an investor who does not want stress, but a good and predictable result.
Given the variation in performance across investment categories, it is interesting to see how investment choices affect the overall amount of savings. The graph below shows how the value of a EUR 1,000 investment in each investment would change over the past five years.
It can be seen that investing in shares has provided investors with very good returns, although they also have to accept quite significant fluctuations in the value of the investment. On the other hand, for investors who want to maintain a calmer mind but ensure almost as good a return, it is worth evaluating the opportunities offered by crowdfunding platforms to lend to small and medium-sized enterprises in the Baltic States.
In response to the question posed at the beginning of the article - where to invest right now with the lowest risk and the highest profit potential? If the goal is to maximize profits and are not afraid of higher risk, then the stock market is still the main path to high profitability. However, if stability with attractive returns is the priority, corporate loans can be a great alternative to traditional investments.