In the slideshow below, you’ll find the top 10 best performing shares in the UK over the last few years. The source information is detailed in the table below. Then, we discuss why you should ignore these top 10 best performing shares if you want to be a successful investor.
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What was your first reaction?
If you are anything like me, your first reaction would have been to run through the top 10 best performing shares and stop at Ashtead Group. Then, you would realise that £100 invested just a few years ago would now be worth £3,663. This means that to be a millionaire today, I would have only needed to have invested £27,300 less than 6 years ago!
My mind skips to thinking about how I can select the next Ashtead Group. There must be some characteristics to this successful company that I can identify elsewhere and emulate.
STOP IT!
What about if I invested on a different day?
As you can see from the above table, the 87% annual returns over the 5.75 years is based on buying shares on 05/12/2008. Let’s take a look at Ashtead’s graph:
Would anyone have been able to note that on 05/12/2008, this would happen to the company? Of course not. It is equally likely that I would have invested in early 2006 after it looked like the company was doing well at around 200-240p.
Then, the company would have underperformed throughout the following 2 years and I would have probably looked elsewhere to invest. Even if I had invested on this date in 2008, would I have left all my initial investment in the share after it doubled in 2012? Probably not.
In reality, not a single person obtains these returns; its impossible. So, whilst they are impressive to look at, PLEASE do not make any investment decision on the basis that you could obtain these types of returns.
What should I do instead?
Instead of scouring the internet for the top 10 best performing shares, I would recommend you to check out our recent article on why passive investing is better than active investing.
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[cunjo layout=”inline_buttons”]
Great post. If I had a time-machine I would definitely go back and buy these stocks, but alas, life is just not that easy. It is likely that these shares will self-correct in the next few years and leave many people with a minuscule investment account. I will instead stick with my boring ol index funds that net me 12% each year. It isn’t glamorous or exciting, but it is going to make me a millionaire well before I turn 60, and that works for me!
I agree with Derek above. These numbers encourages people to buy stocks and hope for similar return once again. But things in stock market aren’t that easy. I’d just look for beating the index growth. I have mutual funds and index funds both and more or less most of those funds are beating the average growth. So I am happy with that. I like your advice to not look for these numbers.