Your returns can be quite poor if you invest in a portfolio of financial stocks

I’m still on vacation now, but I occasionally got to work on Gilgamesh, my personal project, while traveling.

Someone used to ask me if he wanted to invest only in financial securities, or if it was a good idea to invest only in financial companies in his child’s long-term portfolio.

Considering how well local banks UOB, OCBC and DBS are doing, not to mention JPMorgan and Goldman Sachs, you can understand the idea. Even local ETF providers are jumping on the bandwagon to launch financial-themed ETFs.

Gilgamesh allows me to analyze some market return data to more easily get an insightful view of portfolios.

Perhaps the most comprehensive financial portfolio is the MSCI All Country World Financials Index. This is an index that includes financial companies in both developed and emerging markets.

If you google “MSCI ACWI Financials Index” you can get the fact sheet.

The MSCI All Country World Financials index achieved an annualized return of 11.9% per year compare with 12.3% per year of the MSCI All Country World index. Not too bad of a return.

You would understand why people are so enamored with a sector.

It also helps if you look at the top positions:

But what if you had $1 million, a significant portion of your net worth, and you invested in an MSCI All Country World Financials at ANY point in the last twenty years?

I have the index’s market return data from October 2004 through December 2025, which amounts to 20.9 years of market return data. This allows us to see what your return would be in 5 years, 10 years, 15 years or 20 years if you invest that €1 million on any given month.

The annualized return is as follows:

If we roll the return period from month to month, we can get a range of annualized returns and divide them into 9 segments, from the worst annualized returns to the best annualized returns.

The number of copies shows how many periods of x years we can simulate. For example, 193 instances of five-year rolling tenure means that there have been 193 five-year annualized returns between October 2004 and December 2025.

You can get -13.4% per year after investing for 5 years.

This should be the worst of the great financial crisis reaching its absolute peak.

The longer you invest, the worst returns (the 10th and 20th percentiles) get better.

But you may be surprised to learn that the average return, even over 15 years, is 2.8% per year

The 80th, 90th percentile and the best show that you can invest for 15 years and get a return of 8% or 10% per year. But that’s if you’re lucky.

Gilgamesh can also show us the non-annualized cumulative return, or what we call the total return:

So you can invest for 5 years and be left with a portfolio of €1 million with €490,000.

Looking at non-annualized returns can sometimes be quite startling, but it is closer to reality.

But Kyith, what if you take out the emerging markets?

That’s a good question.

You have to remember that Singapore is an emerging market at some point, and you would want to invest in the Singaporean banks when they were financing growth during our country’s growth phase.

Would it be wise to take out the emerging markets? It’s like taking out Singapore, or are you saying that Singapore banks are so unique that if we presented a rolling return profile like the one above, they would look completely different?

Let me be kinder and show the rolling returns of the MSCI World Financials index, an index that excludes emerging markets:

Returns actually look worse than emerging markets.

At some point you have to recognize that your investing experience may be less certain than you thought.

The advice is not to be too concentrated in one sector. There is no best or worst sector. Every sector would have its day when it does better. It’s about whether you are more aware or less aware.

If you want to trade the stocks I mentioned, you can open an account with Interactive real estate agents. Interactive Brokers is the leading, low-cost and efficient broker that I use and trust to invest and trade my investments in Singapore, the United States, the London Stock Exchange and the Hong Kong Stock Exchange. Lets you trade stocks, ETFs, options, futures, forex, bonds and funds worldwide from a single integrated account.

You can read more about my thoughts on Interactive Brokers in this Interactive Brokers Deep Dive series, starting with how to easily create and fund your Interactive Brokers account.

Kyith is the owner and sole writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, more solid wealth foundations, how to pursue a passive investing strategy, learn about investing in REITs, and the basics of active investing.

Readers also follow Kyith to learn how to plan well for financial security and financial independence.

Kyith worked as an IT Operations Engineer from 2004 to 2019. He currently works as a Senior Solutions Specialist at Insurance Start-up Havend. All opinions expressed on Investment Moats are his own and do not represent the views of Providend.

You can view Kyith’s current portfolio herewho uses his Free Google Stock Portfolio Tracker.

His favorite investment broker is Interactive real estate agentsallowing him to invest in securities from various stock exchanges around the world, at very low commission rates, without custody fees, near spot currency rates.

You can read more about Kyith here.