Instead, the estate agent investigates how investing across all London’s 32 boroughs over the period would have helped maximise the returns but minimised the risk.

According to Knight Frank this method of calculating the most beneficial trade-off, called the Sharpe Ratio, shows that investors should have put 13.8 per cent of their portfolio in Brent, north London, followed by 12.4 per cent in Kensington and Chelsea and 10.6 per cent Tower Hamlets.

The data shows that had you built this theoretical portfolio, the capital value growth would have been 620 per cent 1995 to end of 2015.

That compares with a stronger capital growth of 703 per cent if you had invested solely in Westminster, for example, or 836 per cent in Hackney. But that would have come with the added risk of not knowing how those areas would perform at the outset.

Read More: House prices soar by 47,000 per cent since Queen's birth

“Strong long-term price growth has not been confined to higher-value markets in prime central London over the last 20 years,” James Clarke, a partner in Knight Frank’s London team said.

“The majority of the portfolio in our analysis is located outside of zone one, where annual price growth has typically been in double digits and price volatility has been lower.”

Tom Bill, head of London residential research, told City A.M.: “The Sharp ratio is an attempt to take in the volatility. It’s about not putting all your eggs in one basket. The more you diversify the more you are spreading your risk.”

“Over this 20 year period, under this theoretical situation where you are buying in every borough, you would have maximised your return. But by splitting in this way you also minimise your risk.”



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