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The Callan Periodic Table of Investment Returns is a great resource for understanding the trends in asset class performance over the past two decades. Each year, the table ranks the returns of eight different asset classes, from best to worst performance. The asset classes are color-coded to make it easy to track their performance from year to year. A black line separates positive returns, above the line, and negative returns, below it.
When you look at this chart, you may be tempted to find patterns and draw conclusions. The Callan table can tell you a lot about the past, but it cannot predict the future. While it's important to recognize that past performance should not be used to predict future returns, it can be beneficial to understand some key lessons that can be drawn from looking at the past.
My advice is to use the table to look for principles rather than trends. Trends come and go, but principled investing is the key to long-term success.
First and foremost, diversification is key to achieving higher risk-adjusted returns. Concentrating investments in the right funds can lead to greater returns, but it's important to understand that this also means taking on more significant risks. It's essential to have a permanent portfolio of winners and losers and to rebalance it regularly.
Rebalancing helps to maintain the desired asset allocation and manage risk, that is, maintain the desired risk-reward balance. Rebalancing provides an opportunity to sell assets that have appreciated and buy assets that have become undervalued. Doing so helps to prevent large losses due to overexposure to certain assets and keeps the portfolio more diversified. Rebalancing also helps to take advantage of changes in the market and capture profits while they are available.
It's important to take advantage of momentum when it comes to chasing performance, as it can lead to greater returns, but this should be done in moderation to avoid taking on too much risk.
Finally, it's important to remember that you should not change your asset allocation just because a sector has not performed well in the past. Remember that the key to successful investing is to maintain a diversified portfolio that balances risk and reward. By diversifying your portfolio, you are less exposed to the effects of any single sector or asset class. When selecting investments, it's important to consider the long-term outlook for each asset class or sector, rather than trying to time the markets. It's also important to consider the overall balance of your portfolio and your personal investing goals. Taking a long-term approach to investing can help ensure that you are in a better position to weather short-term volatility and maximize returns over the long term.
For a closer look on how each asset class performed in the past 20 years, check this PDF with the Callan Periodic Table of Investment Returns
The Callan Periodic Table of Investment Returns is a great resource for understanding the trends in asset class performance over the past two decades. Each year, the table ranks the returns of eight different asset classes, from best to worst performance. The asset classes are color-coded to make it easy to track their performance from year to year. A black line separates positive returns, above the line, and negative returns, below it.
When you look at this chart, you may be tempted to find patterns and draw conclusions. The Callan table can tell you a lot about the past, but it cannot predict the future. While it's important to recognize that past performance should not be used to predict future returns, it can be beneficial to understand some key lessons that can be drawn from looking at the past.
My advice is to use the table to look for principles rather than trends. Trends come and go, but principled investing is the key to long-term success.
First and foremost, diversification is key to achieving higher risk-adjusted returns. Concentrating investments in the right funds can lead to greater returns, but it's important to understand that this also means taking on more significant risks. It's essential to have a permanent portfolio of winners and losers and to rebalance it regularly.
Rebalancing helps to maintain the desired asset allocation and manage risk, that is, maintain the desired risk-reward balance. Rebalancing provides an opportunity to sell assets that have appreciated and buy assets that have become undervalued. Doing so helps to prevent large losses due to overexposure to certain assets and keeps the portfolio more diversified. Rebalancing also helps to take advantage of changes in the market and capture profits while they are available.
It's important to take advantage of momentum when it comes to chasing performance, as it can lead to greater returns, but this should be done in moderation to avoid taking on too much risk.
Finally, it's important to remember that you should not change your asset allocation just because a sector has not performed well in the past. Remember that the key to successful investing is to maintain a diversified portfolio that balances risk and reward. By diversifying your portfolio, you are less exposed to the effects of any single sector or asset class. When selecting investments, it's important to consider the long-term outlook for each asset class or sector, rather than trying to time the markets. It's also important to consider the overall balance of your portfolio and your personal investing goals. Taking a long-term approach to investing can help ensure that you are in a better position to weather short-term volatility and maximize returns over the long term.
For a closer look on how each asset class performed in the past 20 years, check this PDF with the Callan Periodic Table of Investment Returns
Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Credo Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.
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