The Information Technology (IT) sector proved to be the strongest market area for average annual returns since 2010, according to a study by brokerage and platform comparison provider InvestinGoal.
Based on companies within the S&P 500 index, the sector averaged 18.1% annual returns over the last decade.
The worst year for IT came in 2013, when returns dropped 28.2%, while the sector averaged 50.3% in 2019.
During 2019, IT’s performance was aided by Advanced Micro Devices, Lam Research and KLA, which grew 153%, 117% and 100% respectively.
Filippo Ucchino, CEO of InvestinGoal, said: “Based on this data, investing in the IT sector has proven to be highly rewarding, with strong average returns in the long run. This dynamic sector thrives on innovation and technological advancements, such as software development, cloud computing and artificial intelligence, offering tremendous growth opportunities for investors.
“The enhancement of artificial intelligence in particular poses a starting point for a new era of development in the stock market. In fact, AI-driven systems can analyse vast amounts of data, identify patterns, and make predictive models, ultimately influencing market trends and investment strategies.”
See also: Polar Capital tech trust eyes AI-powered resurgence after tough year
Elsewhere, consumer discretionary stocks provided an average annual return of 15.3% over the 12-year period, despite falling 37% in 2022 alone.
Healthcare (13.4%), industrials (13.2%) and financials (12.3%) were also among the top performing sectors within the S&P 500.
By contrast, communication services endured the toughest time over the 12-year period, with an average annual return on investment of 8.4%.
The energy sector proved the most volatile over the period. Despite averaging the second-worst annual returns of 10.2%, the sector posted the best year for returns in 2022, when it soared 65.7% amid the cost-of-living crisis and war in Ukraine.
| Best sectors to invest in based on average returns from 2010 to 2022 | ||||
| Sector | Average Return on Investment | Min Return on Investment | Max Return on Investment | Ranking |
| IT | 18.1% | -28.2% | 50.3% | 1 |
| Consumer discretionary | 15.3% | -37.0% | 43.1% | 2 |
| Healthcare | 13.4% | -2.7% | 41.5% | 3 |
| Industrials | 13.2% | -13.3% | 40.7% | 4 |
| Financials | 12.3% | -17.1% | 35.6% | 5 |
| Real Estate | 12.2% | -26.1% | 46.2% | 6 |
| Consumer staples | 11.9% | -8.4% | 27.6% | 7 |
| Utilities | 11.0% | -4.8% | 29.0% | 8 |
| Materials | 10.6% | -14.7% | 27.3% | 9 |
| Energy | 10.2% | -33.7% | 65.7% | 10 |
| Communication services | 8.4% | -39.9% | 32.7% | 11 |
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