For as long as I can remember financial advisers have recommended a diversified portfolio of investments consisting of equities, bonds, commercial property and cash. This is known as asset allocation or diversification of risk. It is based on the Nobel Prize winner Harry Markowitz’s Modern Portfolio Theory.

The rationale behind such a strategy is to reduce volatility and achieve steady returns on the basis that each of these four asset classes is uncorrelated to the other three. It also involves reviewing the portfolio several times a year and rebalancing it in order to achieve better returns. The idea being that returns are optimised for a certain level of risk. The theory being that if different assets are perfectly uncorrelated then when one rises in value the other should fall in value. However, in practice correlation is not static, it changes over time especially depending on the prevailing economic conditions. For example at the time of the Great Financial Crisis in 2008, all asset classes fell in value simultaneously as if they were 100% correlated to each other! So much for theory.

Bearing in mind Harry Markowitz’s Modern Portfolio Theory paper was written in 1952 a lot of water has passed under the bridge since then. In particular, the market crashes of 1987, 2000-2002, 2008 and 2022 have laid ghost to such theories. For example, crypto currency didn’t even exist in 1952 nor the Internet. The world has changed beyond recognition since those days.



It’s surely time to consider adding further assets to the mix, especially gold and crypto currency, more specifically Bitcoin, and possibly residential property too. Let’s start by analysing the historical returns for each of these asset classes over the last 10 years.

  • Stocks +9.8%
  • Bonds +4.6%
  • Cash +3.3%
  • Real estate +4.2%
  • Gold +4.9%
  • Inflation +3.0%

Source: A Wealth of Common Sense by Ben Carlson 19.1.24.

As for Bitcoin, it’s average annual rate of return over the last 10 years has been an insane 156.4%!


Admittedly the information from A Wealth of Common Sense is based on returns from  US assets nonetheless the data is quite informative. Gold has outperformed both property investing (real estate) and cash so it is worth considering as an addition to a diversified portfolio of assets.

Unfortunately, there is no breakdown between commercial and residential property but I can confidently say that commercial property tends to generate a higher rental yield than residential property but residential property usually has greater capital appreciation than residential property. Arguably your home shouldn’t be considered as an investment property. On the other hand, buy-to-let properties should be considered as investment assets.



According to the Office for National Statistics, the average UK house price increased in value by 73% for the ten years period from January 2013 until January 2023. That’s equivalent to 5.6% a year. Rental yields on buy-to-let properties are typically 6% a year too. However, this doesn’t take into account the property management expenses and the cost of repairs and maintenance as well as mortgage costs.

Whilst it would be difficult to calculate an accurate average annual return it wouldn’t be unreasonable to estimate it at about 8%-9% p.a. in the UK which would place it as the second best-performing asset in this country behind shares. Of course, if you were to factor in the ability to gear up the investment by mortgaging a buy-to-let, it would be a fair assumption to say that it has been the best-performing investment asset in the UK over the last ten years.

Because there are no buy-to-let residential property funds in the UK it is not practically possible to use it as an investment class in a UK investment portfolio.

As for crypto currency, specifically Bitcoin, this is an asset class which is in a world of its own. Investment returns have been astonishing over the last ten years with an average annual return of 156.4%. During this journey, the price has fluctuated wildly making it an extremely volatile investment as well as a high-risk one.



Bearing in mind that a number of US Bitcoin ETF funds have been launched recently,  the most famous of which is Black Rock which is one of the largest fund managers in the world, it only seems to be a matter of time before Bitcoin funds feature widely and routinely in investors’ portfolios.

So in conclusion it would appear reasonable to include both gold and Bitcoin in a diversified investment portfolio but probably not too much with, say, 5% invested in each asset class together with the four traditional asset classes of equities, bonds, commercial property and cash. Bitcoin is only really suitable for a high-risk investor. You know it makes sense.*



The Financial Conduct Authority does not regulate most crypto assets/services or most buy-to-let mortgages. The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance. Your home may be repossessed if you do not keep up repayments on your mortgage. Bitcoin is a crypto asset. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you are unlikely to be protected if something goes wrong. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.

Tony Byrne

Chartered and Certified Financial Planner

Managing Director of Wealth and Tax Management

If you are looking for expert guidance in Financial Planning contact Wealth and Tax Management on 01908 523740 or email