Are there clear patterns of investment market returns over time? How does a “balanced” global portfolio compare to individual asset classes over the last 20 years? The Periodic Table of Investment Returns presents a valuable perspective and compelling case for diversification amid uncertainty. ”
Many investors are tempted to chase past returns, believing that recent returns represent a continuing pattern. Unfortunately, such market timing is often a recipe for disaster. Last year’s top performer is often at, or near, the bottom in the ensuing years (see MSCI Emerging Markets for the years 2007 – 2013 as an example). Rational and disciplined asset allocation across many styles, with regular rebalancing, is one of the keys to long-term success. Diversification helps you consistently capture the best-returning asset classes, while never having excessive exposure to the worst-returning categories, and generally reduces volatility vs. imbalanced portfolios, and allows for more predictable long-term planning.