The Best Asset Classes to Build Wealth (Ranked By Returns)

What’s on the Menu 🍴

With markets pulling back…

And the employment situation worsening…

Investors are on edge.

But today we’re giving you the data - both historical and forward looking.

Here’s what to watch out for this week and into the future!

Let’s get it:

• What To Watch This Week 👀

• The Best Asset Classes to Build Wealth (Ranked By Returns) 💰

• Is the AI Bubble Ready to Pop? 💭

Today’s newsletter is a 5 minute read.

What To Watch This Week 👀

Stocks and crypto took a big step down last week, with the S&P 500 index losing almost 4% on the week.

It was the worst weekly performance since March 2023.

Investor fears about a softening economy remained elevated after the August unemployment report showed 142K new jobs added, which was weaker than expected.

Bonds did well as yields fell, but most other risk assets sold off.

Crypto, metals, semiconductors, and energy were notable areas with significant selling pressure:

This week all eyes will turn towards the US CPI inflation report…

It could be the deciding factor for the Federal Reserve which meets next week and will decide between a 25 basis point rate cut and a 50 basis point rate cut.

The Euro Central Bank will also make an interest rate decision this week.

Other macro data releases this week include:

• Australia consumer confidence (Mon)

• China trade balance (Mon)

• UK unemployment (Tues)

• US CPI inflation (Wed)

• US PPI inflation (Thurs)

• Euro Central Bank rate decision (Thurs)

• US consumer sentiment (Fri)

• China retail sales (Fri)

• China industrial production (Fri)

The earnings calendar is very light, with just a handful of off-cycle reports coming from Adobe, Oracle, Kroger, Gamestop, and a couple others

Speaking of Gamestop, there was unusual volume last week and a cryptic tweet from Keith Gill (”Roaring Kitty”)…

The famous meme trader may have sold Chewy stock to re-enter a position in Gamestop stock.

We will keep an eye on the meme stocks this week as well as the following:

📈 Rising Recently:

• Consumer Staples (XLP)

• Bonds (IEF / TLT)

📉 Falling Recently:

• Tech & Semiconductors (QQQ / SOXX)

• Crypto (BTC / ETH / WGMI)

• Energy (XLE / XOP)

• Metals & Mining (XME / GDX)

• Homebuilders (XHB)

• Cleantech (TAN / PBW)

• Small Caps (IWM)

• Financials (KRE / KBE)

The Best Asset Classes to Build Wealth
(Ranked By Returns) 💰

Investing isn't just about picking any asset—it's about choosing the right ones to maximize your returns.

Here’s a ranked list of the top asset classes to build wealth in the 2020s, from the highest returns to the lowest, based on their historical performance and future potential:

1. Cryptocurrency: 🚀

   • 10-Year CAGR (compound annual growth rate): Over 200% for Bitcoin

   • Future Projection: Expected to moderate to 20-30% annually

   • Why It Ranks Here: Despite the volatility, early adopters have seen massive gains. Crypto remains a high-risk, high-reward play, with potential for outsized returns as adoption continues.

2. Private Equity & Venture Capital: 💡

   • 10-Year CAGR: 15-20%

   • Future Projection: Likely to stay strong as tech and innovation sectors grow

   • Why It Ranks Here: PE and VC investments can deliver significant returns, but require substantial capital, risk tolerance, and patience due to their illiquid nature.

3. Stocks: 📈

   • 10-Year CAGR: 13.6% for S&P 500, 17.5% for Nasdaq-100

   • Future Projection: Expected to continue around 7-8% annually

   • Why It Ranks Here: A staple of wealth-building, stocks offer reliable growth with room for upside, particularly in tech and emerging sectors.

4. Collectibles and Alternative Assets: 🎨

   • 10-Year CAGR: 8.5% for fine art, up to 12% for rare whiskeys

   • Future Projection: Likely to remain attractive as niche markets expand

   • Why It Ranks Here: These assets diversify portfolios and have shown strong performance, though they require specific market knowledge and are often less liquid.

5. Real Estate: 🏠

   • 10-Year CAGR: 7.1% for residential real estate

   • Future Projection: Expected returns of 5-6% as markets stabilize post-pandemic

   • Why It Ranks Here: Real estate offers steady appreciation and rental income, making it a solid, long-term play for investors seeking tangible assets.

6. Commodities: 🛢️

   • 10-Year CAGR: 1.6% for gold, 3-4% for broader commodities

   • Future Projection: Returns could rise to 5-6% amid inflation concerns

   • Why It Ranks Here: While not the highest earners, commodities provide an inflation hedge and can smooth out portfolio volatility.

7. Bonds: 💵

   • 10-Year CAGR: 2.3% for U.S. Treasury bonds

   • Future Projection: Anticipated to remain at 2-3% given low interest rate environment

   • Why It Ranks Here: Bonds offer stability and income but lag behind other asset classes in terms of growth potential.

Wealth Killers to Avoid: Gambling, sports betting, and lotteries consistently provide negative returns, with the odds heavily stacked against you.

Save your money for investments that actually grow.

Is the AI Bubble Ready to Pop? 💭

AI has been the darling of the tech world, but into the fall season, the question on everyone’s mind is:

Are we in an AI bubble that’s about to burst?

Nvidia's Rally and the AI Surge

Nvidia has been at the heart of the AI boom, with net income up a staggering 152% year-over-year.

This isn’t just a company riding a trend; it’s practically printing money on the back of AI demand.

Giants like Meta, Google, and Amazon are snapping up GPUs and other AI infrastructure at record pace. It’s been a buying frenzy—server racks, cooling systems, high-performance memory, you name it.

Everything is flying off the shelves as companies race to build out their AI capabilities.

But here’s the bear case:

What if this spending is front-loaded?

If these companies don’t see the anticipated returns from AI investments, they might have to hit the brakes on spending.

We’ve seen it before—think fiber optics during the early internet boom or the overbuild in electric vehicles. If AI spending slows, we could see a ripple effect across tech and semiconductor stocks, with demand potentially dropping 30-50%.

That’s a hefty correction for any investor to swallow.

Are We at Peak AI?

So, is the AI bubble popping?

Not quite.

Nvidia’s numbers are still climbing, and the demand for AI-related tech remains robust.

But cracks are showing.

Investors are starting to price in the possibility that the AI gold rush might not be sustainable. The big tech players are rolling out AI features—Google’s AI summaries in search, Meta’s AI-enhanced services—but are these features driving real revenue? So far, it’s mostly smoke, mirrors, and a lot of investor optimism.

• Companies have yet to prove that these flashy AI tools are adding to their bottom line in a meaningful way.

• Google has integrated AI across various products, from search to productivity tools, but where’s the new money?

• Meta’s AI chat features might keep users engaged, but they’re not generating more ad dollars—at least, not yet.

It’s all about keeping up in the AI arms race, not necessarily winning it.

The AI Race: Innovation vs. ROI

The race to integrate AI is as much about not falling behind as it is about leading the pack.

Companies are scrambling to add AI features just to stay relevant—think Canva’s AI tools or Adobe’s AI-powered creative solutions.

But at some point, the question will be:

Are customers willing to pay more for these enhanced services?

If costs skyrocket without a corresponding boost in revenue, we might see backlash from users who aren’t ready to shell out triple the price for marginal gains.

Interestingly, there’s a potential cost-saving angle here. Industries like healthcare, airlines, and other sectors that rely heavily on customer service and call centers could see major reductions in expenses by deploying advanced AI chatbots.

The promise is that these new AI models will finally deliver on the potential to replace human labor efficiently—a promise that, until now, has fallen flat.

Investors Beware: Timing the Correction

The bottom line for investors?

Timing is everything.

The market tends to react before the overcapacity becomes glaringly obvious. Right now, we’re starting to see some nervousness in stock prices, but the full extent of the AI bubble (if it is indeed a bubble) has yet to materialize.

While Nvidia and other AI-driven stocks are still posting impressive numbers, the cracks could widen as companies face investor scrutiny over the ROI of their massive AI expenditures.

Click here to watch our discussion about the AI bubble

Food For Thought 🧠

“Stability leads to instability. The more stable things become and the longer things are stable, the more unstable they will be when the crisis hits.”
- Hyman Minsky

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.