Callan Periodic Table of Investment Returns

[CDRE]

I've enjoyed these charts each year. The 2019 table is the 20th anniversary edition:



https://www.callan.com/wp-content/uploads/2019/01/Classic-Periodic-Table-2019.pdf

 

[audreyh1]

Thank you! I like to review this chart each year.

In 2018 Cash was King!

Followed by US fixed income, which broke even in spite of rising interest rates.

Everything else was negative!

 

[sengsational]

I'd like to see the table reported on July through June+1 besides January through December. I've been curious how different it would or would not look.

 

[audreyh1]

I'd like to see the table reported on July through June+1 besides January through December. I've been curious how different it would or would not look.

It’s going to appear mostly random. Just like the existing one does.

There is some time correlation - an asset class that has a bad year or two often bounces back. But otherwise it’s all over the map.

 

[brucethebroker]

thanks for the heads up-always fascinating reading.

 

[Col. Klink]

Cash was king in 2018. Hopefully this year will be better.

 

[CDRE]

I'd like to see the table reported on July through June+1 besides January through December. I've been curious how different it would or would not look.

I'd rather see the 2020 table today.

 

[big-papa]

I've always enjoyed these. They clearly illustrate how difficult it is to pick the asset class year on year that will be the winner. What it doesn't show, however, is which asset classes have the higher longer term returns with corresponding increases in volatility. Other tools for that exist elsewhere. Another tool in the toolbox...

 

[audreyh1]

I agree - this table always reinforces my decision to rebalance my portfolio annually and not try to tilt my asset allocation in anticipation of some asset classes doing better or worse in the near future.

In terms of higher long term returns and volatility, you can pull it out of the chart. You can certainly get a feel for the relative volatility by observing which asset classes tend to bounce from near the top and bottom most often. 20 year average returns - well you’ll have to use a spreadsheet. I notice the content of the table is selectable.

 

[steelyman]

I first came across this 10 or so years ago and remember tallying them up on a spreadsheet in yearly rank order.

The results didn’t change anything regarding my allocation but were interesting.

 

[OldShooter]

Ah, the "quilt chart." Uniquely combining ugliness with incomprehensibility.

 

[Winemaker]

One can surmise that Emerging Markets and Real Estate can be the most profitable over the past 20 years. And the least.

Maybe most volatile.

 

[audreyh1]

Ah, the "quilt chart." Uniquely combining ugliness with incomprehensibility.

I find it very comprehensible. It’s a terrific graphical display of data.

Not everybody responds to graphical displays of data the same way.

 

[Jerry1]

In 2018 Cash was King!

Wow. 2018 was just a bad year all the way around. Except cash, of course.

 

[NW-Bound]

I find it very comprehensible. It’s a terrific graphical display of data.

Not everybody responds to graphical displays of data the same way.

It shows in a glance which segments of the market did well and which did not in past years. I am not an indexer, and own most of these segments in different proportions. I like to look at the chart for a summary.

If the chart looks confusing, it is because the market, and in general real life, is that way. And the messiness of the market is what scares some people and drives them to keep all of their money in CDs or bonds. It keeps things orderly and simple for them.

 

[OldShooter]

To be clear, I understand the chart very well. I have seen (and mostly ignored) its various incarnations over most of the years it has been in existence. The investment guys at DW's former megabank practically worshiped the thing.

The incomprehensibility is this: It is a depiction of random results in which many people look for patterns. Nassim Taleb points out repeatedly that it is a human urge to seek patterns and causes in randomness. (Read "Fooled by Randomness") This is how Zeus and Odin came to be, to explain thunder. In a more contemporary vein, it is how the investing version of astrology, "technical analysis," came into existence and is still hanging onto life (though barely).

... If the chart looks confusing, it is because the market, and in general real life, is that way. And the messiness of the market is what scares some people and drives them to keep all of their money in CDs or bonds. It keeps things orderly and simple for them.

Agreed. Further, the "messiness" is the randomness. But the randomness does have an overall slight upward bias of a few percent per year; that is the only pattern and it is how investors make money.

In my investing class, I point out that this random behavior leads to two very important conclusions: 1) It is pointless to look at prices except over long periods of time and 2) it is fairly easy to get lucky. Taleb's other theme is the tendency of people who have gotten lucky to conclude from it that they are geniuses. BTDT, but have long since learned my lesson.

 

[sengsational]

It’s going to appear mostly random. Just like the existing one does.

There is some time correlation - an asset class that has a bad year or two often bounces back. But otherwise it’s all over the map.

True, presuming no seasonality and no "window dressing". Those are probably minimal. If the offset chart is no different than the by year chart, that would increase even more the statement of randomness.

 

[ERD50]

I first came across this 10 or so years ago and remember tallying them up on a spreadsheet in yearly rank order.

The results didn’t change anything regarding my allocation but were interesting.

This year, I am going to draw on some inner strength, and not look at the darn thing!

It is interesting, and worth posting, but then I spend hours analyzing it, and decide to do nothing anyway, hah. So this year, I will try to save myself the trouble. Enjoy!

-ERD50

 

[steelyman]

This year, I am going to draw on some inner strength, and not look at the darn thing!



It is interesting, and worth posting, but then I spend hours analyzing it, and decide to do nothing anyway, hah. So this year, I will try to save myself the trouble. Enjoy!



-ERD50

Ha! Good for you! Sometimes it’s best to just let things stand as they are.

I’m also glad the chart was posted.

 

[audreyh1]

To be clear, I understand the chart very well. I have seen (and mostly ignored) its various incarnations over most of the years it has been in existence. The investment guys at DW's former megabank practically worshiped the thing.

The incomprehensibility is this: It is a depiction of random results in which many people look for patterns. Nassim Taleb points out repeatedly that it is a human urge to seek patterns and causes in randomness. (Read "Fooled by Randomness") This is how Zeus and Odin came to be, to explain thunder. In a more contemporary vein, it is how the investing version of astrology, "technical analysis," came into existence and is still hanging onto life (though barely).

Agreed. Further, the "messiness" is the randomness. But the randomness does have an overall slight upward bias of a few percent per year; that is the only pattern and it is how investors make money.

In my investing class, I point out that this random behavior leads to two very important conclusions: 1) It is pointless to look at prices except over long periods of time and 2) it is fairly easy to get lucky. Taleb's other theme is the tendency of people who have gotten lucky to conclude from it that they are geniuses. BTDT, but have long since learned my lesson.

I see the chart as an explicit confirmation of mostly randomness in relative annual asset class performance with some pattern of asset classes having a good year after undergoing a period of underperformance and vice versa (i.e. the general concept of “returning to the mean”). Yet at the same time you can see that some assets classes may underperform for years, and then suddenly outperform for years, so there is no way to predict the next year asset class relative performance.

So your criticism is not of the chart. Your criticism is that some investors may look for patterns in such a chart. IMO that has nothing to do with the chart or how the data was graphically presented.

 

[OldShooter]

... So your criticism is not of the chart. Your criticism is that some investors may look for patterns in such a chart. IMO that has nothing to do with the chart or how the data was graphically presented.

Agreed, for this crowd. But for the average aka less sophisticated person, I'll stick with "incomprehensible."

 

[Svensk Anga]

I used the Callan table when I was plotting out my Roth conversion strategy several years ago. This was when we could still recharacterize and therefore the Roth horserace strategy came about. The Callan table showed that there was very likely benefit to converting a bunch of different asset classes and retaining the best one. The spread between classes is often fairly large.



I got to do two years of the enhanced strategy before Congress pulled the plug. They got us for $50K or so too on killing the enhanced SS claiming strategy. (We are too young to be grandfathered.)


Oh well. As long as the market keeps going up, all's good.

 

[gcgang]

Wow!

Thanks!

This is great!

I'm redecorating my home office. Do you know where I can get the Callan chart in wallpaper?

 

[athena53]

I love this chart! People have said it might be better for experienced investors but I think it's a great way to show people who are trying to chase the latest hot segment what a bad idea that can be.

My one criticism, and there's really no way to fix it, is that if an investment loses 35% in one year and gains 50% the next, it may be at the top of the heap for that year but it's still down 2.5% for the two-year period. (.65*1.5 = .975.) The cumulative results are important.

 

[copyright1997reloaded]

In my investing class, I point out that this random behavior leads to two very important conclusions: 1) It is pointless to look at prices except over long periods of time and 2) it is fairly easy to get lucky. Taleb's other theme is the tendency of people who have gotten lucky to conclude from it that they are geniuses. BTDT, but have long since learned my lesson.

Curious question: Would you consider Warren Buffet to just have gotten lucky? As of May 2018, BRK had a 20.9% annualized return, more than 2X the S&P 500. Or was that just concentration return/risk?

ETA: 20.9% from 1964 to 2018, a pretty long period of time.