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A Look at the Callan Periodic Table of Investment Returns
By JLP | January 12, 2007
The newly-updated Callan Periodic Table of Investment Returns(PDF) is out. I LOVE this thing! I spent most of last night “analyzing” the table. I took the data and rearranged it different ways to see if there’s a different way to look at the information and to see if there is any sort of pattern that can be gleened from this table.
As you can see from the table, the various indexes are ranked annually according to their performance. The best-performing index is at the top and the worst-performing index is at the bottom. Callan has also color-coded each index to make it easier to find on the chart. This is what makes the chart interesting. Take a second and look at the chart. What do you see? The first thing that popped into my mind was how random the chart looks. There’s no pattern to detect. In other words, the chart offers no predictive power because there’s no pattern to the past. Just to prove it, I arranged the data in a different format. I took each index and counted the number of times it ranked in each place and came up with the following table:
This tells us that the MSCI EAFE index performed the best in 5 out of the 20 years (it also performed the worst in 7 out of 20 years). Notice, with a couple of exceptions, how evenly spread out the numbers are.
Finally, I arranged the data by index and their returns for each year along with their Geometric Average (or CAGR also known as the Compound Annual Growth Rate). The “worst” performer of the group was the Lehman Aggregate Bond index. That really should be no surprise. What is a surprise to me is how poorly the Russell 200o Growth Index and the MSCI EAFE Index performed over the 20-year period. They barely beat the bond index and had a lot more volatility.
All of this information is about the performance of each individual index. I’m going to follow this post up with some analysis of how these indexes would have worked together as a portfolio. So don’t fret, there’s more excitement to come!
Topics: Index Funds, Investing |
January 12th, 2007 at 2:01 pm
I also like the one Janus puts out because it throws in a diversified portfolio made up of equal parts of all indexes and shows the return. When you have a diversified portfolio a pattern does emerge… the boxes gravitate towards the middle.
So while never the best performing it was also never the worst, and only had 4 negative annual returns since 1991 and all but one of the years with positive returns were higher than the 10 or 11% average everyone compares returns to.
A great illustration that diversifying across the various indexes can yield consistent and attractive returns with little effort or investment knowledge.
https://ww4.janus.com/SiteObjects/published/FFFFFFFFA8347B540106A689CB6E5086/02945FCE582819260109BBCBE0E0820F/file/Periodic%20Table%20with%20Tax%20Chart%20exp%204-15-07.pdf
January 13th, 2007 at 7:11 am
Wow — that is so cool! Thanks for sharing JLP. I had never heard of this “Periodic Table” before.
January 14th, 2007 at 10:54 am
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January 16th, 2007 at 1:38 am
[...] It has been months since I last put together a calculator. My latest calculator, the Asset Allocation and Portfolio Performance Calculator, came to fruition after I put together my post about the Callan Periodic Table of Investment Returns. The returns I talked about in that post were all individual index returns. Those are fine and good but most people are more interested in how what they mean to a portfolio. So, I created a somewhat-simple portfolio calculator that will allow you to enter: [...]
February 5th, 2007 at 1:23 pm
[...] First we’ll look at the total returns for various indexes (asset classes) found in the Callan Periodic Table of Investment Returns: [...]
October 26th, 2007 at 1:30 pm
[...] I’m guessing the three years are 2004 - 2006. If that’s the case, there’s no excuse to have negative returns. According to the Callan Periodic Table of Investment Returns, the S&P 500 Index total annual returns for 2004 - 2006 were 10.88, 4.91, and 15.79, respectively. To turn in a negative return over that same period of time is inexcuseable. This manager must be on drugs. [...]
February 23rd, 2008 at 9:57 am
Janus also includes MidCaps - which do very well (similar to the diversified portfolio) across most years.
March 28th, 2008 at 5:04 am
[...] There was also a second Heartland study and this one focused on the returns of value stocks across different holding periods. When one examines the Callan Periodic data table, it is quite evident that different asset classes perform quite differently from year to year. Let me quote from Swedroe’s book, “What Wall Street Doesn’t Want You To Know.” [...]