We have all heard of the periodic table of elements but what is the Callan Periodic Table of Investment Returns? This table looks to graphically depict annual returns for various asset classes and ranks them from best to worst. The 9 asset classes include: Cash Equivalents, Large Cap Equity, Small Cap Equity, Developed non-United States Equity, Emerging Market Equity, United States Fixed Income, High Yield, Global non-United States Fixed Income and Real Estate. The return is based off of the industry-standard market indices for each asset class.
When we look at how the different asset classes perform over the long term, this table highlights the importance of diversification. As the age-old quote goes “Don’t put all of your eggs in one basket”. The same can certainly be said when it comes to investing. This is supported by The Callan Periodic Table because it shows that no one knows what asset class is going to win year over year and that past performance does not determine future performance. We have seen time and time again that even the experts fail to predict the markets, so we favor a diversified portfolio over one that tries to time the market or predict future returns.
Looking at this year, both our fixed income and equity asset classes are down! If the markets continue to follow this trend throughout the remainder of 2022, our Real Estate and Cash Equivalents will be the best performing asset classes! Real Estate has done very well over the last two years and we continue to hear about the limited housing supply and homes selling well over their asking price. This has caused many of our client’s net worth to remain relatively stable despite the volatility that we have seen in our fixed income and equity markets.
Cash Equivalents have also performed very well this year strictly because they have not gone down. While we do not expect Cash Equivalents to be one of the best performing asset classes over the long haul, this highlights the importance of having that piece in your portfolio.
As always, please reach out if you have any additional questions.