Callan periodic table of investment returns
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|The Callan Periodic Table is the best visual information showing the importance of asset class diversification and the futility of market timing. It is a primary reason for which many Bogleheads favor total market index funds.|
First published in 1999,[note 1] the Callan periodic table of investment returns is patterned after Mendeleev's periodic table of the elements and shows returns for 10 asset classes, ranked from best to worst. Each asset class is color-coded for easy tracking.[note 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).
Refer to the table below. The rankings change every year, thereby demonstrating two key principles of investing:
- Diversification: by owning the entire market (all of the asset classes), susceptibility to changes in market returns is minimized.
- Past performance does not predict future performance.
View full size ©2018 by Callan LLC. Reprinted with permission.
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:
- 1998 - 1st
- 1999 - 3rd
- 2000 - 8th
- 2001 - 2004 - 9th (3 consecutive years)
- 2005 - 8th
- 2006 - 9th
- 2007 - 3rd
- 2008 - 2009 - 5th (2 consecutive years)
- 2010 - 8th
- 2011 - 2nd
- 2012 - 8th
- 2013 - 4th
- 2014 - 2015 - 1st (2 consecutive years)
- 2016 - 8th
- 2017 - 2nd
Putting the table into perspective
Periodic tables provide a great visual about diversification benefits, but tend to be more qualitative than quantitative. The simple ranking from best to worse notably does not allow one to easily appreciate the scaling of annual returns.
The following dispersion graph (distribution spread of returns over time) is therefore useful to put such a periodic table in perspective. Notice how the difference between the highest return (blue) and lowest return (red) changes over time.
In addition, it is challenging to get a sense of returns averaged over a period of time with a periodic table. The following table of statistics is therefore useful to consider.
One statistic that is 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. The lower the ratio of standard deviation to mean return, the better your risk-return tradeoff.
Over the past 20 years (1998 - 2017), the lowest coefficient of variation is "Aggregate Bonds" (0.69); the highest is World Ex USA (2.77).
Create your own periodic table
A spreadsheet for creating your own periodic table is available in this Bogleheads® forum topic:.
The latest version and download instructions are in this post, which is a direct download from Google Drive.
Detailed instructions and revision history are in the "README" tab.
- Authored by Jay Kloepfer, Director of Callan’s Capital Markets and Alternatives Research.
- There were 8 asset classes until 2009. Emerging markets was added in 2010, for a total of 9 asset classes. In 2013, the addition of Barclay's Corporate high yield brought the total to 10.
In 2017, "MSCI World ex USA" replaced "MSCI EAFE". The entire table was rebuilt using "MSCI World ex USA".
- Bogleheads® forum post: , LadyGeek. September 7, 2018
- Mendeleev's periodic table of the elements
- Periodic Tables, by Callan LLC.
- The Callan Periodic Table of Investment Returns (Key Indices: 1998-2017), viewed Sep 07, 2018.
- Bogleheads® forum post: , siamond. Sep 07,2018
- Coefficient of variation, Wikipedia
- Bogleheads® forum post: , Garco. Jan 27, 2013
- Periodic table of annual returns, on finiki, the Canadian financial wiki. Total returns for Canadian investors.
- Periodic Tables, by Callan LLC. Includes links to the "classic" table, a collection of tables ("classic"and 10 additional versions including the indices relative to inflation, real estate indices, and hedge fund sub-strategies), and a table of monthly rankings.
- The Importance of Diversification, asset classes for the past ten years, from Allianz Global Investors - Literature Center.
- Periodic Table of Investments, asset classes for the past ten years, from Janus Henderson Investors
- Periodic table of sector returns from usfunds.com, covers years 2005 - 2014.
- Periodic table of commodity returns from usfunds.com, covers years 2001 - 2010.
- Bogleheads® forum topic: , triceratop. Jan 06, 2018
- Bogleheads® forum topic: , Tamales. Jan 01, 2016. A comprehensive list of asset class returns compiled by forum member Tamales.