Every year, the investment consultant firm Callan Associates updates their, ‘Callan Periodic Table of Investment Returns’ -a very nifty visual representation of the performance of 8 major asset classes over the last 20 years. It has been updated for 2015 and is worth a look for any investor.
You can see the latest report here in PDF format.
The grid is aligned so that the best performing asset classes are listed at the top.
The Callan Periodic Table of Investment Returns conveys the strong case for diversification across asset classes (stocks vs.
bonds), investment styles (growth vs. value), capitalizations (large vs. small), and equity markets (U.S. vs. international). The Table
highlights the uncertainty inherent in all capital markets. Rankings change every year. Also noteworthy is the difference between
absolute and relative performance, as returns for the top-performing asset class span a wide range over the past 20 years.
I think the colored asset classes make it easy to visually differentiate how performance has bounced around for different asset classes. It’s particularly eye opening to see that certain classes that are at the top of the chart in one year can fall to the bottom the next.
The chart should stress to you the importance of holding multiple asset classes. Diversify. Trying to predict one class that will perform well in a given year is extremely risky.
You should already know this, but extra reinforcement never hurts, right?
As a shocking example take a look at emerging markets – the best asset class for 8 of 21 years, and also the worst or second to worst asset class for 9 of 21 years.
I hope this chart stands as a reminder to not only diversify but to also stay the course when one of your asset classes are performing poorly. There’s plenty of volatility seen each year but in the long run things tend to balance out.