From Grant Wasylik, chief analyst, The Palm Beach Letter: That is, review the “Periodic Table of Investment Returns”… This is something I do at the beginning of each year. I’ve been doing it every year for more than 10 years.
Who is Callan? And why do I do this?
Callan Associates Inc. has been around for over 40 years. It’s one of the largest independently owned investment consulting firms in the U.S. Callan advises on almost $2 trillion in assets.
I’m familiar with the company and website because of the table of investment returns it publishes each year. The table includes the past 20 years of investment returns. And it measures the returns of several key indices. Then, returns are ranked—each year—from best to worst.
I like to see which asset classes have done well over the past year… and which ones have done poorly. Often times, the classes that washed out the previous year have the best potential to shoot higher in the new year. Plus, I can easily scan the prior 19 years.
The “periodic table” also illustrates the benefits of diversification. For example, if you didn’t have large-cap stocks (growth, value, and “blend”) in 2014, you missed out on the highest returns… over 12% for the year.
If you neglected small caps in 2013, you missed the highest-performing asset class: The Russell 2000 Small Cap Indices returned 43%, 39%, and 35%. So, while overall 2013 was a great year for equities… leaving small-cap stocks out of your portfolio would have cost you extra returns.
While our asset allocation models give you exposure to several of Callan’s key asset classes and indices (large caps, small caps, bonds, etc.), you get a lot more (mega caps, mid caps, micro caps, options, gold, etc.). Plus we have eight, unique asset classes in our models… some of which Wall Street ignores entirely.
So grab a copy of Callan’s chart above. Or at least take a peek. An index that’s been floundering at the bottom could be poised to make a move up the column. But remember: While Callan’s chart can be a helpful tool, it’s just a small piece of the puzzle. You want a thorough diversification across asset classes.
At the Palm Beach Research Group, we’ve carved out the most comprehensive asset allocation model in the newsletter industry. Check it out, right here.