Callan periodic table of investment returns

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Imbox notice.png 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.[1]


First published in 1999, [footnotes 1] the Callan periodic table of investment returns is patterned after Mendeleev's periodic table of the elements [2] and shows returns for 9 asset classes, ranked from best to worst. Each asset class is color-coded for easy tracking.[3][footnotes 2]

The chart is intended to show the importance of diversification across asset classes (stocks versus bonds), investment styles (growth versus value), capitalizations (large versus small) and equity markets (U.S. versus international).[4]

Refer to the table below (view full size).[5] The rankings change every year, thereby demonstrating several key principles of investing: [footnotes 3]


  • Past performance does not predict future performance.
  • Diversification: By owning the entire market (all of the asset classes), susceptibility to changes in market variations is minimized.
  • Reversion-to-the-mean: Large variations over a short period of time, but tends to be stable when viewed over the long term. [footnotes 4]

Callan Periodic Table of Investment Returns.png

How to read the table

For example: S&P 500 Growth (a measure of the growth style for US large cap stocks). Starting at the left side, this measure ranked:

  • 1994 - 2nd
  • 1995 - 1998 - 1st (4 consecutive years)
  • 1999 - 3rd
  • 2000 - 7th
  • 2001 - 2006 - 8th (6 consecutive years)
  • 2007 - 3rd
  • 2008 - 2009 - 4th (2 consecutive years)
  • 2010 - 7th
  • 2011 - 2nd
  • 2012 - 7th
  • 2013 - 4th

See also

Notes

  1. Authored by Jay Kloepfer, Director of Callan’s Capital Markets and Alternatives Research.
  2. There were 8 asset classes until 2009. Emerging markets was added in 2010, for a total of 9 asset classes.
  3. (view Google Spreadsheet in browser or download as xls, ods, or pdf)

  4. (view Google Spreadsheet in browser or download as xls, ods, or pdf)

    One statistic that's sometimes informative is the "Coefficient of Variation" (CV), which is simply the standard deviation divided by the mean. This is sometimes called the "coefficient of relative variation." It is the inverse of a signal-to-noise ratio, thus it's a noise to signal ratio. (See Coefficient of variation Wikipedia.) The lower the ratio of standard deviation to mean return, the better your risk-return tradeoff. (See: [Wiki] Callan periodic table of investment returns, direct link to post.)

    If you calculate that using the standard deviation and the simple average return for the 20 years, you get: highest CV=Russell 2000 Gr (2.64). Lowest CV=Agg Bond (0.72).

    In order from lowest CV (least volatile) to highest CV: Agg Bond (0.72), Russell 2000 V (1.56), Russell 2000 & SP500 V (tied) (1.85), SP500 (1.91), SP500 G (2.11), EM (2.49), EAFE (2.51), Russell 2000 G (2.64).

References

  1. Callan Periodic Table of Investment Returns, Taylor Larimore, direct link to post.
  2. Mendeleev's periodic table of the elements
  3. Periodic Tables, by Callan Associates Inc.
  4. The Callan Periodic Table of Investment Returns (Key Indices: 1993-2012)
  5. Permission is given for anyone to download, print, and use the Periodic Table in its current form. See: Periodic Tables

External links

Forum discussions