callan chart 2021

Callan Chart 2021: Two Decades in Review

Investing Prediction for 2021 Based Upon the Callan Chart

The Callan Chart proves that humans are pattern-seeking animals. From Rorschach tests to designs in clouds, we seek to impose structure where there is none. So too with investors and the Callan Chart. 

Many people try to predict the future by looking at past performance.

The Callan Chart ranks annual returns for different asset classes over the last 20 years. Lessons from the past are plenty for the investor, though the future is thus far insoluble.

Formally known as the Periodic Table of Investment Returns 2021 or the Callen Periodic Table, let’s look at the past to see what we can learn about 2021 and beyond.

The Callan Periodic Table 2021


The Callan Periodic Table 2021

Above, find the Callan Periodic Table 2021 in all its glory! Look for trends. Find patterns. Then continue reading.

At first glance, I see the five boxes of orange along the top from 2003-2007. These are the golden years for emerging markets. But note how many years after that orange is on the bottom row!

The large-cap has done well in the last two decades. Look at the dark blue! However, the best-performing asset class returned the best overall only for a single year (2014).

Patterns are everywhere when you look at the table in the traditional view.

Let’s have a different look at the Callan Periodic Table.

The Callan Periodic Table Ranked Relative to Zero

Callan periodic table

This is a less-traditional view of the Callan Periodic Table but more instructive. The black line dominates this figure: positive returns are above and negative below.

It is more difficult to find patterns in the undulating rows.

Three of the years had positive returns for all the asset classes! On the flip side, even the worse years have winning asset classes.

What other patterns do you see?

Rank Ordering the Callan Periodic Table

periodic table of investment returns 2021

Figure 3 (Rank Order of the Asset Classes for 10 and 5 Years)

Above, you can see the order asset classes finished during the last decade. In parentheses is the average spot out of 10. So, for instance, large-cap is first and, on average, is 3.6 of the nine asset classes.

Small-cap is next, followed by REITs. Finally, emerging and international equities lag.

Interestingly, the last five years were similar to the previous ten years. Large and small-cap US stocks did even better, and Emerging markets and international equity did even worse.

What about the decade before the last?

Rank Order from 1999-2008

callan periodic table 2021

Figure 4 (Rank Order of the Asset Classes for 10 and 5 Years 1999-2008)

Going back another decade, we can see the rank order is quite different!

Here, Emerging markets win, followed by Real Estate and Small Cap. Large Cap is last!

The ten vs. 5-year results are a little different, as can be seen. During those five years, from 2004-to 2008, international equities did pretty well, and the US not so much.

Lessons from the Past via the Callan Chart

So, what can we learn about the future by looking at the past via the Callan Chart?

Lesson 1:

Nobody knows which horse is going to win this year’s race. There is no future predictive value of the Callan Periodic Table. What does this mean? Past performance doesn’t mean much for the future. Don’t buy last year’s winners.

Predicting the future is easy: no one can do it. So run from anyone who tries to predict future returns.

Lesson 2:

Diversification leads to lower returns but higher risk-adjusted returns. People often get this wrong. They think diversification in their assets will lead to higher returns. Concentration—in the right funds—leads to higher returns. This is why owners of winning companies are the wealthiest people around. However, diversification leads to higher risk-adjusted returns. You want to permanently own all the winners all the time (and, unfortunately, all the losers too). And then rebalance.

Lesson 3:

Rebalance! This is a tricky one. Rebalancing too often stunts your winners. But eventually, winners revert to the mean. So, how often should you rebalance? You decide.

Lesson 4:

Chase performance! Unfortunately, most investors follow this advice. They invest in last year’s winners.

Momentum is important. You can get greater returns on the back of last year’s winners until a certain point. Then they should revert to the mean. Stay invested in the winners too.

Lesson 5:

Don’t underweight what isn’t sexy! How about that for a triple-negative… But, trying not to be prescriptive, a triple-negative works best here. Is “overweight what isn’t sexy” or “underweight what is sexy” better?

The lesson here is to stick to your guns. Keep it up if your programmed asset allocation from your Investor Policy Statement includes international equities! This has been a losing decade for international equities, but that’s the point. Will the US continue to out-compete all competitors for the rest of history?

Callan Periodic Table and Retirement

What can retirees learn from the Callan Periodic Table? I think the lessons in retirement are the same as those in the accumulation phase: Diversify and don’t chase returns.

Fundamentally, retirement is turning assets into income. Having a diverse set of income options can help prevent Sequence of Retruns Risk. Next, don’t chase returns in retirement. Know your asset allocation and how many years of “safer” money you have so that you don’t need outsize returns from your bonds. Stocks are where you take risk: bonds aren’t for risk chasing. 

And even for those who are retired:

Don’t Underweight What Isn’t Sexy

This is the lesson of the Callan Periodic Table. Keep investing in what performed poorly last year. It will cycle back to the top again at some point. Buy low; sell high.

Investing Prediction for 2021 Based Upon the Callan Periodic Table

Stocks and bonds will go up and down. As a result, some people will make money, and some will lose money.

Who knows with more certainty than that? The Callan Periodic Table of Investment Returns 2021 doesn’t.

When looking at Callan Chart, don’t look for trends; rather, see principles.

Trends come and go; principled investing stands the test of time.

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One Comment

  1. Great advice.

    It’s simple…Invest. Keep costs low. Diversify. Rebalance periodically. Ignore the noise…

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