Callan Periodic Table of Investment Returns

[minesweep]

Annual Returns for Key Indices (1992–2011) Ranked in Order of Performance

MIke

[btenny]

Is this is a new version of the table? The version I remember included Mid Caps value and growth. Do they still publish that version?

Bill

[LadyGeek]

A link to the table is in the wiki (it's easier if you search for it): Financial Websites and Blogs (Research and other Financial Articles).

Here's the direct link: Periodic Tables. Both free and restricted access (needs a login account) versions are available. I don't know what's in the restricted version.

Neither mid caps or small caps are shown in the free version.

[riskonoff]

Annual Returns for Key Indices (1992–2011) Ranked in Order of Performance

MIke

thanks for the info.

a while back i was given one by a insurance salesman from Securian. It was good because at the end it gave annualized returns for the last 10 or so years. They also had a box for a 'Diversified 60/40' portfolio which was consistently in the middle of the pack.

[GregLee]

It's a very pretty and colorful chart, but is it really periodic?

I saw an orange box for 2011 giving -2.91% as the value of the Russell 2000 Growth index, which is for small cap growth stocks. Two thirds of my portfolio happens to be in a small cap growth (active management) fund, T. Rowe Price New Horizons, so naturally I compared. My fund is up 5.8% for 2011, which is over 8% better than the index. It makes me wonder.

[grayfox]

Annual Returns for Key Indices (1992–2011) Ranked in Order of Performance

MIke

Thanks! So the winner in 2011 was Barclay Aggregate Bond Index with 7.84% return. Last year it had almost as good return, 6.54%, but was dead last! It seems like the bond index just plods along with fairly consistent annual returns, but goes up or down in the ranking based on how good or bad the other classes, i.e. stocks, do.

The big loser in 2011 was MSCI Emerging Markets with -18.17% return. It was also the loser in 2008 with -53.18, but #1 in 2009 with 79.02. With Emerging Markets, it either shoots the lights out or crashes and burns.

This is like the tortoise versus the hare. The bond index is the tortoise, plodding along with mostly single digit returns. Emerging markets is the hare, with either huge gains or huge losses.

Fascinating stuff.

[mickeyd]

Thanks for posting the chart. I always enjoying checking the extremes. For instance BC Agg was last in 6 of the last 9 years and first in 2 of the last 4 years.

Who can predict this?

No One.

Stay the course.

[jjustice]

I noticed that BC Agg goes to last for a year or more after it's been first. Just saying.
John

[Taylor Larimore]

Hi Mike:

Thank you for the link to the current Callan Periodic Table of Investment Returns.

In my opinion, the Callan Table is the best visual information showing the importance of diversification, reversion-to-the-mean, and the impossibility of forecasting asset-class returns.

It is a primary reason Bogleheads favor total market index funds.

Best wishes.
Taylor

[heyyou]

I second what Taylor said. The Callan Periodic Table (CPT) is not a book, but it is full of lessons about market history.

On printed CPTs, I put a wider black line between the positive and the negative returning assets for each year, just to emphasize where zero return is.

The CPT does refute the misconception of investors expecting to receive returns near the often advertised "average". The percentage numbers are more shocking than speaking of standard deviations.

If anyone knows of other, similar charts please post them. Janus funds used to make one and someone else, but my memory fails me. One included REITs and another showed the average of equal portions of each asset class. Having more or different categories would avoid any contention of copying Callan's work.

[CABob]

If anyone knows of other, similar charts please post them.

Janus link several years old https://ww4.janus.com/SiteObjects/publi ... -15-09.pdf

Allianz link http://www.allianzinvestors.com/Marketi ... _ACO33.pdf

I think there was also one from Russell, but, could not find current.

[Leif Eriksen]

Hi Mike:

Thank you for the link to the current Callan Periodic Table of Investment Returns.

In my opinion, the Callan Table is the best visual information showing the importance of diversification, reversion-to-the-mean, and the impossibility of forecasting asset-class returns.

It is a primary reason Bogleheads favor total market index funds.

Best wishes.
Taylor

I look at it differently.

I see it as a reason to favor diversification of asset classes rather than diversification of individual stocks. A subtle but important difference.

[riskonoff]

i guess this is done with rebalancing, but i love to buy last years worst performers etc...buy low/sell high and always avoid buying the past years best performer.

right now buying int'l equities and reinvesting all bond income into equities.

[TN_INVEST]

Hi Mike:

Thank you for the link to the current Callan Periodic Table of Investment Returns.

In my opinion, the Callan Table is the best visual information showing the importance of diversification, reversion-to-the-mean, and the impossibility of forecasting asset-class returns.

It is a primary reason Bogleheads favor total market index funds.

Best wishes.
Taylor

I look at it differently.

I see it as a reason to favor diversification of asset classes rather than diversification of individual stocks. A subtle but important difference.

Maybe I'm missing something, but it sounds as if you and Taylor are saying the same thing (I didn't see anywhere that Taylor mentioned anything about individual stocks).

[alanf56]

What sticks out with BC AGG is that only twice did it fall into the negative returns. All the rest of the years varied and really returned quite well. Interesting indeed.

[grayfox]

i guess this is done with rebalancing, but i love to buy last years worst performers etc...buy low/sell high and always avoid buying the past years best performer.

right now buying int'l equities and reinvesting all bond income into equities.

That's one idea for using the Callan table. Kind of a reversal approach. But what happens when theres a streak?

For instance, Emerging Markets
1994 dead last
1995 dead last
1996 next to last
1997 dead last
1998 dead last

Bond index was dead last four straight years-- 2003, 2004, 2005 and 2006

And Emerging Markets was #1 five years straight-- 2003, 2004, 2005, 2006, 2007
Growth stocks were great for five years--1994, 1995, 1996, 1997, 1998

In those cases the "hot hands" approach worked best.

[sadie wess]

I second, third, fourth, and fifth Taylor Larimore. I find the Callan Table very helpful and have ever since it was handed to me during an investment class in Princeton,N.J. in 2008.

Thanks Grayfox for the posting.
SW

[Leif Eriksen]

Hi Mike:

Thank you for the link to the current Callan Periodic Table of Investment Returns.

In my opinion, the Callan Table is the best visual information showing the importance of diversification, reversion-to-the-mean, and the impossibility of forecasting asset-class returns.

It is a primary reason Bogleheads favor total market index funds.

Best wishes.
Taylor

I look at it differently.

I see it as a reason to favor diversification of asset classes rather than diversification of individual stocks. A subtle but important difference.

Maybe I'm missing something, but it sounds as if you and Taylor are saying the same thing (I didn't see anywhere that Taylor mentioned anything about individual stocks).

I did say it was subtle.

Taylor promotes the total market, which gives you market weight for the entire market. However, from an asset class point of view this tends to favor large cap growth companies. A diversified asset class gives you more small cap, value, REITs, or other assets classes then if held only in the total market.

On the other hand, Taylor also promotes diversified asset classes (see his excellent quote below this reply.) However, I think the total market alone does not give you very good asset class diversification. I guess that is where we differ.

[yobria]

Seeing recent threads on more and more precise ways to model historical stock returns, and a few posts re: how dramatically to bet this or that corner of the stock market, I figured this thread was worth a bump.

Looking at Vanguard funds, it appears growth will beat value again this year, and large will beat small, but anything can happen over the remainder of the year. Next year? Who knows - the world is a very random place.

[Beagler]

...I think the total market alone does not give you very good asset class diversification.

Comparison of VG's Large-Cap Index fund and TSM from the date of the former's inception:

[Investor2]

Seeing recent threads on more and more precise ways to model historical stock returns, and a few posts re: how dramatically to bet this or that corner of the stock market, I figured this thread was worth a bump.

Yobria, thanks for the bump on this thread. The chart is great - I've never seen anything like this before. It definitely supports the idea that its better to simply buy broad indexes and hold them, rather than trying to guess which market segments are likely to outperform.

[Hatch Batten]

Here's a similar chart for sectors - Dow Jones 1992-2009

http://allfinancialmatters.com/2010/08/ ... 1992-2009/

[xram]

...I think the total market alone does not give you very good asset class diversification.

Comparison of VG's Large-Cap Index fund and TSM from the date of the former's inception:

Wow

[yobria]

Here's a similar chart for sectors - Dow Jones 1992-2009

http://allfinancialmatters.com/2010/08/ ... 1992-2009/

Interesting, I hadn't seen that one. Same message.

[Aptenodytes]

It's a very pretty and colorful chart, but is it really periodic?

No, it isn't periodic. Whoever named it probably thought that the word "periodic" either meant something like "scientific" or "serious," or thought that it was a filler word with no meaning (which is what it is in this context). Needlessly undermines the integrity of the presentation.

[Taylor Larimore]

From The Free Dictionary:

In technical use, periodic means "at regular or predictable intervals," as in the Periodic Table of the Elements. Often, however, periodic is used to mean "occasional, intermittent." This usage can be confusing for readers who are accustomed to the narrower sense of the word.

http://www.thefreedictionary.com/periodic

Best wishes.
Taylor

[Aptenodytes]

From The Free Dictionary:

In technical use, periodic means "at regular or predictable intervals," as in the Periodic Table of the Elements. Often, however, periodic is used to mean "occasional, intermittent." This usage can be confusing for readers who are accustomed to the narrower sense of the word.

http://www.thefreedictionary.com/periodic

Best wishes.
Taylor

Both definitions are fine, but the table isn't periodic under either one. For it to be periodic under the second meaning it would have to come out once in a while.

The simplest explanation is that the authors meant the term to mean something like "serious." Possibly they meant "annual" because the columns increment by one as you move to the right. But that's definitely not a period, because nothing repeats, nor is it intermittent, because the interval is constant.

Anyway, no big deal. Still, "Yearly Investment Returns by Asset Class" would have been more clear and more serious. The title they have sounds frivolous to me.

[pingo]

I never worried about the definitional aspects of "periodic" for the Callan Table.

I figured it was called that merely from aesthetics.

It kinda looks like the periodic table, therefore they called it a periodic table.

The first time I saw I thought, "Cool! It kinda does look like the periodic table." Periodic felt appropriate.

To each his own.

[JayMack]

A question which has surely been asked and answered numerous times, but, with apologies for not being successful with my research, here goes--do the returns shown on the "periodic" charts include dividends?...or they simply market prices?

Jim

[Aptenodytes]

A question which has surely been asked and answered numerous times, but, with apologies for not being successful with my research, here goes--do the returns shown on the "periodic" charts include dividends?...or they simply market prices?

Jim

It is confusing, isn't it? A little reverse engineering makes it clear, though -- the returns include dividends.

This confusion is the result of more sloppy labeling. The table refers to "annual returns for key indices" but in fact that's not what is in the table at all. The table should have been titled "annual returns for key asset classes," which in fact is what the Callan Web site linking to the document does. Indices don't really have returns, though the asset classes whose prices the indices track do.

As one of my mentors told me over and over, "be precise or pay the price."

To be fair, someone worked hard at putting this graphic together in a way that would effectively communicate an important point clearly, and for the most part they succeeded. They deserve praise.

[Aptenodytes]

I never worried about the definitional aspects of "periodic" for the Callan Table.

I figured it was called that merely from aesthetics.

It kinda looks like the periodic table, therefore they called it a periodic table.

The first time I saw I thought, "Cool! It kinda does look like the periodic table." Periodic felt appropriate.

To each his own.

I get it. But to be clear, the main point of this table is precisely the opposite of the periodic table, which is why it grates. The whole point of the periodic table of the elements was to order the information about the elements in way that revealed an underlying structure -- knowing what row and column an element is in tells you a lot about the element. In the case of investment returns, exactly the opposite is true. What can you tell me about what the asset category that is going to be ranked third in 2015 -- nothing. In fact, that's the key message of the table.

[Clive]

.....

[Beagler]

...I think the total market alone does not give you very good asset class diversification.

Comparison of VG's Large-Cap Index fund and TSM from the date of the former's inception:

Wow

Here's a comparison of TSM and the S&P 500 from inception of TSM:

[JayMack]

Kudos to Aptenodytes for your response to my query as you explained that dividends are included in the returns shown in the tables. A true Boglehead you are, giving not only the answer but the logic as well.

Jim