The research, surveying more than 1,000 investors from across the UK, revealed that only nine per cent of investors correctly identified that equities had returned the most over the past 12 months to December 2007.

Although 43 per cent of people didn’t know what had done best, 33 per cent thought that residential property offered the best returns.

Investors who were prepared to be more adventurous with their equity investments would have fared much better. According to statistics from Bloomberg, the MSCI Emerging Markets generated returns of 39.37 per cent in 2007.

John Bearman, chief investment officer at Santander Asset Management, says, ‘This research highlights the gap between consumer perception and reality. It raises a number of important issues, primarily that equities are still suffering negative sentiment despite their performance in 2007. This is further evidenced by the volatile equity markets we have seen in 2008 to date.

‘Based on this research, the opportunity cost of this perception gap remains significant. During the course of 2007, for example, the FTSE 100 Total Return Index rose 7.36 per cent. This means investors in cash or residential property in this example would have missed out on an additional 1.59 per cent or 2.56 per cent respectively.’

Nearly half of investors remain unsure which asset class will do best in 2008. However, of those with an opinion, most thought residential property would do best (15 per cent), with 12 per cent each believing that cash and stocks and shares would do well.

A further five per cent believed commercial property and UK government bonds would fare best. Only three per cent believed UK corporate bonds would be the best-performing asset in 2008.

Bearman points out, ‘This research highlights the need to build a well-diversified portfolio comprising the major asset classes of equities, cash, property and fixed income.’