Sri Lanka Comes First in Guardian's Best and Worst Investments of 2010

01st January 2011, www.guardian.co.uk, By Patrick Collinson

In 2009, the little-known Colombo Stock Exchange rose a remarkable 128% after the Sri Lankan government formally declared an end to the 25-year civil war.

This year, the market has soared again, rising by 101% (in sterling terms) in the year to 20 December, according to figures compiled for Guardian Money by Vanguard, which operates a wide range of index funds. Argentina, once a by-word for economic default, is also back in fashion among investors. The Buenos Aires Bourse advanced 82%, closely followed by the Thai exchange (up 70%) and the Ukraine (up 68%, and no, we didn't know there was a stock market there, either).

The Sri Lanka stock market is reported to be one of the most modern exchanges in South Asia, with a fully automated trading platform. The value of the companies traded on the market is now more than $20bn (£13bn), and 2011 will see companies such as SriLankan Airlines listing its shares.

The island's economy is expected to grow 8% in 2010 and 9% in 2011 – rates usually seen in China. Tourism is booming, with 750,000 visitors anticipated in 2011, while tea exporters are also enjoying strong gains.

At the bottom end of the world indices were Ireland and Greece. The FTSE Ireland Banks index fell 67% in 2010, while the FTSE Greece Financials index was down 57%. Ironically, the country which did default, Argentina (albeit back in 2002), enjoyed huge gains in 2010, led by its banking sector. BBVA Banco Francés rose more than 90%, while Grupo Financiero Galicia leapt by an extraordinary 185%.

But few British retail investors would have seen these rises or falls in their portfolios. The average fund in the main UK All Companies sector clipped along at a respectable 19.5%, as the FTSE 100 recovered strongly. Top performers were MFM Slater Growth, BlackRock Growth and Recovery, and Unicorn Outstanding British Companies. Funds which invested in smaller companies generally outperformed those in large companies.

Anything with "gold" in its title did well. There are more than 2,000 unit trust-style funds on offer to UK investors, and of the top 10 in 2010, seven were invested in gold stocks. Some were tiny funds, but the list does include the £2.3bn JPM Natural Resources fund. It gave its investors a return of nearly 50% over the year.

The most disappointing sector for mainstream UK investors were "Absolute Return" funds which use sophisticated hedging strategies to, they promise, give investors enhanced returns. But most people would have been better off leaving their cash in a deposit account. The average Absolute Return fund was up 4.3% over the year, but that's before costs, so new investors would barely have seen any return.

The weirdest returns on the year came in "rare earths". Between April and October 2010, Cerium oxide, which is used to finish semiconductors, soared in price by more than 600%. China controls almost 95% of the world's rare earths, and when it cut export quotas, the price ballooned.

And here are the rest of our 11 money-making tips for 2011: