When surfing the web, every once in a while, I run into information that is pure gold. Consider the Callan Periodic Table of Investment Returns that I found the other day. For the 20-year period 1984-2003, it ranks the annual returns of eight asset classes from best to worst. The table elegantly makes the case for portfolio diversification, as the rankings seem to change every year like musical chairs.
The distribution of #1 rankings is as follows:
LB Agg. Bond: 3/20
MSCI EAFE: 5/20
Russell 2000 Growth: 3/20
Russell 2000 Value: 4/20
S&P/Barra 500 Growth: 5/20
For 2004 (as of 11/30/2004), the rankings look like this:
Russell 2000 Value (19.4%)
MSCI EAFE (15.19%)
Russell 2000 (14.93%)
S&P/Barra 500 Value (12.06%)
Russell 2000 Growth (10.34%)
S&P 500 (7.23%)
LB Agg. Bond (3.39%)
S&P/Barra 500 Growth (2.47%)
It is interesting to note that in 5 of the last 6 years, small cap (growth or value) has outperformed all other asset categories. Similarly, large cap growth has been a laggard in the last five years, but was #1 in 4/5 pervious years. Perhaps, we are entering a period where large cap are going to outperform small cap equities.
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