The Callan Periodic Table updated for 2012

[runner26]

The Callan Periodic Table of Investment Returns has been updated with 2012 data. It can be accessed here:
http://www.callan.com/research/download ... %2f655.pdf

[Mill]

Thanks for the link. I havent seen that before.

[Taylor Larimore]

The Callan Periodic Table of Investment Returns has been updated with 2012 data. It can be accessed here:
http://www.callan.com/research/download ... %2f655.pdf

Runner26:

Thank you for the update. The Callan Periodic Table is my favorite.

The CPT demonstrates the futility of trying to time the market. It also demonstrates the benefit of investing in the total market.

Mr. Bogle likes to say: "Don't search for a needle in the haystack. Own the haystack."

Best wishes
Taylor

[czeckers]

Thank you for the update. The winners are ofcourse unknowable in advance as Larry Swedroe and Rick Ferri have reminded us today, yet it is of course so obvious in retrospect and how could you not know that international would do so well? I do wish that the table would include domestic and international REITs though. At the Callan website, those downloads are locked.

-K

[Tim_in_GA]

Thanks for the link. I'd love to have one that covers the next 20 years.

[NateH]

One of my favorite charts, and the one of the biggest reasons why I chose a Slide & Dice allocation over Total Market.

[tommoran2]

And the first shall be last ...

[buckstar]

And the first shall be last ...

and the last shall be the first...

[minesweep]

Not too much Mister-In-Between for EM. EM finished 9 out of 20 years at the top of the heap, and 7 years at the bottom.

Mike

[Aptenodytes]

That's interesting that so many people like the chart. I really hate it. I don't see it as demonstrating the benefit of investing in the total market at all. It obscures a lot of relevant information. Suppose someone thought that investing in emerging markets and value stocks was the key to riches. This chart doesn't dissuade. Or suppose someone thought that you might as well avoid bonds because their average returns are so low. This chart doesn't dissuade from that either.

I think rank orders are a very ineffective way to communicate quantitative information. Consider the 2012 ranks, in which there's very little variance until you get to bonds at the bottom. Then look at a year like 2000, where the variance is enormous. The graphics in the chart imply that the two years are similar (a random ranking) when they are actually quite different (high correlation versus low correlation).

The data behind the chart are relevant for making the point about investing in the total market, but I don't think the chart serves that purpose. I would drop some of the highly correlated funds (drop S&P500 and Russeill 2000, for example, because they correlate so highly with their growth flavors), and focus on the moving averages and variances, not the rank orders.

If I wanted to convince someone of the benefit of owning the market, I'd plot 5-year moving average + variance of the non-redundant funds, on top of a representative whole-market basket.

This table is what I'd call chart junk. It looks pretty and means something to people who already have internalized the message it is trying to convey, but doesn't communicate to others.

[Aptenodytes]

Sorry, one more thing. For investors in the accumulation phase, what really matters is the cumulative effective of regular investments over time with rebalancing. Categories that sometimes fall down low aren't so bad if you are buying lots of shares during those periods (what we used to call "dollar cost averaging") and those shares then shoot up in value later on, when they are sold at a profit during rebalancing.

So the ideal chart for many investors would compare portfolio returns over time, not just the annualized sector returns.

Knowing that a sector vacillates between top and bottom isn't relevant to a long-term investor. You need to know the mean and variance.

[Taylor Larimore]

Bogleheads:

PIMCO has a similar Table for bonds:

The Benefits of a Diversified Bond Portfolio

Best wishes
Taylor

[Culture]

The CPT demonstrates the futility of trying to time the market. It also demonstrates the benefit of investing in the total market.

Unfortunately, the conclusion that my less financially educated friends draw from this diagram is "See, I told you so, this proves you can get a 31% average annual return over the past 10 years by picking sectors!"

[mickeyd]

The annual Callan chart always reminds me about how important it is to invest in a diversified way and stay the course. Thanks for posting.

[telemark]

I look at that and immediately think "rebalancing bonus."

[epimedium]

I like how this chart is used to support divergent points of view. One sees support for a total market approach while another sees support for slice and dice.

[MariaT]

Thank you for the link, runner26. I look forward to this chart every year.

All the best,
Maria

[umfundi]

For comparison:

http://en.wikipedia.org/wiki/Periodic_table

I believe there is not an update of the table for 2012.

Keith

[NateH]

Not too much Mister-In-Between for EM. EM finished 9 out of 20 years at the top of the heap, and 7 years at the bottom.

Mike

Some call that volatility; I call it 're-balancing bonus', a.k.a. a very cheap lunch.
(if your stomach can keep it down)

[LadyGeek]

Thanks for the update. The link is already in the wiki: Research and other Financial Articles

The direct link: Callan Associates | Periodic Tables

epimedium - I would not think to associate Salvador Dali with investing, but somehow it works.

[pingo]

Unfortunately, the conclusion that my less financially educated friends draw from this diagram is "See, I told you so, this proves you can get a 31% average annual return over the past 10 years by picking sectors!"

[umfundi]

Unfortunately, the conclusion that my less financially educated friends draw from this diagram is "See, I told you so, this proves you can get a 31% average annual return over the past 10 years by picking sectors!"

So, it's a Rorschach test. It reveals information about those who see it.

Keith

[jon-nyc]

Interesting that EM was either first or last in 15 out of 20 years.

[englishgirl]

Unfortunately, the conclusion that my less financially educated friends draw from this diagram is "See, I told you so, this proves you can get a 31% average annual return over the past 10 years by picking sectors!"

So, it's a Rorschach test. It reveals information about those who see it.

Keith

Yup, it seems to show different things to different people. It always makes me think how glad I am to have plenty of bonds in my portfolio. In years when bonds are last, at least they're usually putting in a modest positive return. In the rare years when bonds are negative, at least they're only negative by a small amount whereas usually every other sector has really bad negative years every now and then. And in years when bonds are on top of the table, then everything else is sucking really bad. To me, it definitely shows the anchoring effect that bonds have.

Of course, some years, I'm also thinking "dang, I wish I'd had a lot of emerging markets" or whatever else comes up on top. Old ways of thinking die hard!

[Trev H]

I have the Callan Chart data back to 1980 in Excel.

Some of the older charts showed REIT and they did not include EM (had EAFE only for International).

If you would like to have at the data - included it below in CSV format.

YEAR,LCV,LCB,LCG,SCV,SCB,SCG,REIT,EAFE,BND
1980,23.59,32.50,39.40,25.39,38.83,52.26,24.40,22.60,2.71
1981,0.02,-4.92,-9.81,14.58,2.68,-9.23,6.00,-2.27,6.26
1982,21.04,21.55,22.03,28.52,24.76,20.99,21.60,-1.86,32.65
1983,28.89,22.56,16.24,38.63,29.39,20.14,30.60,23.69,8.19
1984,10.52,6.27,2.33,2.27,-6.79,-15.84,20.90,7.41,15.15
1985,29.68,31.73,33.31,31.01,31.05,30.97,19.10,56.14,22.13
1986,21.67,18.67,14.50,7.41,5.68,3.58,19.20,69.46,15.30
1987,3.68,5.25,6.50,-7.11,-8.80,-10.48,-3.60,24.64,2.75
1988,21.67,16.61,11.95,29.47,25.02,20.37,13.50,28.26,7.89
1989,26.13,31.69,36.40,12.43,16.26,20.17,8.80,10.53,14.53
1990,-6.85,-3.11,0.20,-21.77,-19.48,-17.41,-15.40,-23.45,8.96
1991,22.56,30.47,38.37,41.70,46.04,51.19,35.70,12.14,16.00
1992,10.52,7.62,5.06,29.14,18.41,7.77,14.60,-12.18,7.40
1993,18.61,10.08,1.68,23.77,18.88,13.37,19.70,32.57,9.75
1994,-0.64,1.32,3.14,-1.54,-1.82,-2.43,3.20,7.78,-2.92
1995,36.99,37.58,38.13,25.75,28.45,31.04,15.30,11.21,18.46
1996,22.00,22.96,23.97,21.37,16.49,11.26,35.30,6.05,3.64
1997,29.98,33.36,36.52,31.78,22.36,12.95,20.30,1.78,9.64
1998,14.69,28.58,42.16,-6.45,-2.55,1.23,-17.50,20.00,8.70
1999,12.73,21.04,28.24,-1.49,21.26,43.09,-4.60,26.96,-0.82
2000,6.08,-9.11,-22.08,22.83,-3.02,-22.43,26.40,-14.17,11.63
2001,-11.71,-11.89,-12.73,14.02,2.49,-9.23,13.90,-21.44,8.43
2002,-20.85,-22.10,-23.59,-11.43,-20.48,-30.26,3.80,-15.94,10.26
2003,31.79,28.68,25.66,46.03,47.25,48.54,37.60,38.59,4.10
2004,15.71,10.88,6.13,22.25,18.33,14.31,31.60,20.25,4.34
2005,6.33,4.91,4.00,4.71,4.55,4.15,11.89,13.54,2.43
2006,20.81,15.79,11.01,23.48,18.37,13.35,35.07,26.34,4.33
2007,1.99,5.49,9.13,-9.78,-1.57,7.05,-16.46,11.17,6.97
2008,-39.22,-37.00,-34.92,-28.92,-33.79,-38.54,-37.05,-43.38,5.24
2009,21.17,26.47,31.57,20.58,27.17,34.47,29.58,31.78,5.93
2010,15.10,15.06,15.05,24.50,26.85,29.09,28.49,7.75,6.54
2011,-0.48,2.11,4.65,-5.50,-4.18,-2.91,8.62,-12.14,7.84
2012,17.68,16.00,14.61,18.05,16.35,14.59,17.69,17.32,4.21
CAGR,11.16,11.20,10.90,12.55,10.58,8.13,12.38,9.15,8.55
StDev,16.14,17.15,19.50,18.40,18.98,22.71,17.56,22.85,6.88
1.00=,32.86,33.25,30.42,49.53,27.66,13.19,47.02,17.96,14.97


At the end I have calculation data for CAGR, StDev and Growth of 1.00

To get that in to Excel... do this...

Select the data from the text above, then right-click, copy

Open Excel - select cell A-1, do right-click, paste

Click on column A, then go up to "Data", then text-to-columns, select Delimited (should default), click Next, specify Delimiters (Comma only), click Finish.

You got it at that point.

Trev H

[nisiprius]

I think rank orders are a very ineffective way to communicate quantitative information.

My thoughts exactly. To me, the most pernicious thing in investing is to think of it in sports terms--in sports, the athlete wins the same prize whether he beat the runner-up by an inch or a lap.

Investing porn is always talking about direction, not magnitude. We are constantly hearing counts--Bill Miller's Legg Mason Value Trust beat the S&P 500 15 years in a row. That completely masks the real picture, which was more like "all but tied for three years, beat it by a lot six years in a row, then all but tied it for six years." The real streak was only six years long. Far too much stress was placed on the fact that he did edge out the S&P during the other nine years, and as he himself observed, that was only true measuring by calendar years--if the years were measured from some day other than January 1st it would not have been true.

I think the emphasis in athletics on who won, not by how much, comes from war; reading the Patrick O'Brian novels, for example, one becomes acutely aware that it is enormously consequential in some sea battles which ship is faster, even by the tiniest amount, or which ship's guns have a longer range, even by the tiniest amount; the outcome of the battle does depend on who's faster, not by how much faster they are.

Yup, it seems to show different things to different people. It always makes me think how glad I am to have plenty of bonds in my portfolio. In years when bonds are last, at least they're usually putting in a modest positive return. In the rare years when bonds are negative, at least they're only negative by a small amount whereas usually every other sector has really bad negative years every now and then. And in years when bonds are on top of the table, then everything else is sucking really bad. To me, it definitely shows the anchoring effect that bonds have.

Precisely. But if you focus on "how often stocks beat bonds," you won't see that.

[mptfan]

Bogleheads:

PIMCO has a similar Table for bonds:

The Benefits of a Diversified Bond Portfolio

Taylor, thank you for that link. It is interesting to me that it demonstrates how bond diversification is so important, and yet, the Vanguard "Total" Bond Market Fund does not have 6 of the 13 bond categories on that chart.

[pingo]

PIMCO has a similar Table for bonds:

The Benefits of a Diversified Bond Portfolio

My first thought was:

Oh my gosh! Look at the returns on those Emerging Markets bonds!

My next thought was:

Has anyone even captured those returns in an actual fund or are they going to change once enough people start chasing them?

[minesweep]

Interesting that EM was either first or last in 15 out of 20 years.

Actually it's 16 out of 20 years.

Mike

[grayfox]

I like the Callan Table because it looks like a bingo card.
Put a chip on your favorite color and then they spin the wheel of fortune.

What I see is that EM is either at the top or bottom 16/20 years.
So bet on EM and it will either win or lose big.
I also like the color of EM. For Longhorn fans, it is UT's burnt orange.
So it's got that going for it, also. Hook 'em, horns!

Then I see that when EM is on the bottom, BONDS are often at the top, and vice versa.
One of them is likely to pay off. Bingo!

The Grayfox Tipsheet says equal bets on EM and BND in 2013.

[xram]

Bogleheads:

PIMCO has a similar Table for bonds:

The Benefits of a Diversified Bond Portfolio

Taylor, thank you for that link. It is interesting to me that it demonstrates how bond diversification is so important, and yet, the Vanguard "Total" Bond Market Fund does not have 6 of the 13 bond categories on that chart.

I would like to learn more / hear more thoughts on the above quoted post.......
.
.

Do I need to further diversify my bond holdings?

Thanks
Xram

[LadyGeek]

I don't think you can view the bond table in the same way you look at equities. Bonds are debt instruments. You are promised to get back your principal + some interest. Consequently, bonds are rated in terms of the time horizon (date to maturity) and credit worthiness of the issuer. Stocks follow the rise and fall of the company's success.

I'd say you are diversified in terms of owning the whole market, with some extra padding for TIPS.

For perspective, consider that this chart was published by a bond fund issuer.

[xram]

Bogleheads:

PIMCO has a similar Table for bonds:

The Benefits of a Diversified Bond Portfolio

Taylor, thank you for that link. It is interesting to me that it demonstrates how bond diversification is so important, and yet, the Vanguard "Total" Bond Market Fund does not have 6 of the 13 bond categories on that chart.

Which 6 of 13 are not included in total bond market?

Does anybody own these other 6? Why? Via what ETF or mutual fund?

Thanks again
xram

[xram]

I don't think you can view the bond table in the same way you look at equities. Bonds are debt instruments. You are promised to get back your principal + some interest. Consequently, bonds are rated in terms of the time horizon (date to maturity) and credit worthiness of the issuer. Stocks follow the rise and fall of the company's success.

I'd say you are diversified in terms of owning the whole market, with some extra padding for TIPS.

For perspective, consider that this chart was published by a bond fund issuer.

Thanks
xram

[nisiprius]

PIMCO has a similar Table for bonds:
The Benefits of a Diversified Bond Portfolio

It is interesting to me that it demonstrates how bond diversification is so important, and yet, the Vanguard "Total" Bond Market Fund does not have 6 of the 13 bond categories on that chart.

Which 6 of 13 are not included in total bond market? Does anybody own these other 6? Why? Via what ETF or mutual fund?

Perhaps it would be better if Vanguard had named it the Vanguard Aggregate Bond Index Fund. In PIMCO's word's, "the Barclays U.S. Aggregate Index represents the domestic investment grade fixed rate, taxable bond market." I do not think it is fair to complain

• that the fund contains only the classes of bond that are included in the index it tracks,
• that an investment-grade bond fund does not include junk bonds, or that
• a domestic bond fund does not include international bonds.

xram, of the categories named by PIMCO, these six are not included:
Domestic--U. S. TIPS, municipal bonds, high-yield;
International--"emerging markets," "global (unhedged)," and "foreign (hedged)".

These six are included: long Treasuries, intermediate Treasuries, short Treasuries, investment-grade corporates, mortgages, and of course BAGG (Barclay's Aggregate).

I can't quite figure out whether the Barclay's Aggregate includes Treasury bills or not.

TIPS, incidentally, only amount to something like 3 or 4% of all Treasuries and it wouldn't change things much if they were included.

[xram]

PIMCO has a similar Table for bonds:
The Benefits of a Diversified Bond Portfolio

It is interesting to me that it demonstrates how bond diversification is so important, and yet, the Vanguard "Total" Bond Market Fund does not have 6 of the 13 bond categories on that chart.

Which 6 of 13 are not included in total bond market? Does anybody own these other 6? Why? Via what ETF or mutual fund?

Perhaps it would be better if Vanguard had named it the Vanguard Aggregate Bond Index Fund. In PIMCO's word's, "the Barclays U.S. Aggregate Index represents the domestic investment grade fixed rate, taxable bond market." I do not think it is fair to complain

• that the fund contains only the classes of bond that are included in the index it tracks,
• that an investment-grade bond fund does not include junk bonds, or that
• a domestic bond fund does not include international bonds.

xram, of the categories named by PIMCO, these six are not included:
Domestic--U. S. TIPS, municipal bonds, high-yield;
International--"emerging markets," "global (unhedged)," and "foreign (hedged)".

These six are included: long Treasuries, intermediate Treasuries, short Treasuries, investment-grade corporates, mortgages, and of course BAGG (Barclay's Aggregate).

I can't quite figure out whether the Barclay's Aggregate includes Treasury bills or not.

TIPS, incidentally, only amount to something like 3 or 4% of all Treasuries and it wouldn't change things much if they were included.

Thanks

I know past performance does not guarantee future performance ...but... Emerging market bonds have only been negative one time between 2002 and 2012. Even with the higher expense ratio, are they really that risky to not include them? Just asking.....

[xram]

The Callan Periodic Table of Investment Returns has been updated with 2012 data. It can be accessed here:
http://www.callan.com/research/download ... %2f655.pdf

How/where does VSS (Vanguard FTSE All-World ex-US Small-Cap Index ETF) fit into this table? Thanks

[xram]

Are these VANGUARD ETFs matched correctly to the appropriate index?
Percentages are not correct yet....



working on a vanguard periodic table.....for my own learnin'

[LadyGeek]

Good idea. Keep learnin'...

When you're done, can you upload that to Google Docs and share the link?

[grabiner]

Are these VANGUARD ETFs matched correctly to the appropriate index?
Percentages are not correct yet....



working on a vanguard periodic table.....for my own learnin'

You might also add VSS (international small), VNQ (real estate), and possibly VNQI (foreign real estate). And if you include non-Vanguard ETFs, TIP (TIPS) is another important asset class missing from the table.