ivgnnm

2014/08/13

15 Year Look At Asset Class, Sector, And Country Returns

15 Year Look At Asset Class, Sector, And Country Returns

Annual Asset Class Returns

The chart below shows several issues investors struggle with all the time. It’s difficult to pick the best performing investment year after year, yet for many investors it’s an annual event. They look for an encore, picking the best asset class last year with the hope of a repeat performance. Yet, betting on last year’s winner rarely works out.

Assets at the top of the chart one year could be at the bottom the next, and vice versa. Much of this is due to reversion to the mean. But over the long-term, those big swings even out. The chart shows annual returns for eight asset classes against a diversified portfolio. Diversification works to smooth out those big swings in the short-term. While you’ll never get the biggest gains of any year, you avoid the huge losses.

The table below ranks the best to worst investment returns by asset class over the past 15 years.

The idea was to make a table that represented index funds the average investor would own. Most of the asset class tables either cover every asset class possible (with value and growth styles too) or toss in hedge funds, commodities, or other alternatives that most of us should/would never use.

I kept it simple by picking the more common asset classes the average investor would build a portfolio around. For stocks, I used large caps, small caps, international, emerging markets and REITs. The next three tables break down three of those stock asset classes further. For bonds, I stayed with high-grade U.S./corporate bonds and riskier high yield bonds. I added a diversified global portfolio with those assets as a comparison tool.

Annual S&P Sector Performance

The chart below breaks down the annual performance of the S&P 500 sectors. Not only do you get an idea of how a small group of stocks affects the S&P each year, you see how each sector performs through economic and stock market cycles.

While sectors can bounce around from year to year, top to bottom and back again, over the long-term, those big swings even out. The chart shows annual returns for the ten stock market sectors against the S&P 500.

The table below ranks the best to worst sector returns over the past 12 years.

The best way to show why the U.S. stock market performed the way it did is to break it down by sector. There are ten sectors or broad categories that every stock fits into: Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Technology, Materials, Telecomm, and Utilities. I added the S&P 500 as a reference.

In any given year, one or more of these sectors can have a big impact on the performance of the U.S. market. For example, you’ll notice how much the financial sector has dragged down the S&P 500 despite the performance of the other sectors.

International Stock Market Performance

It’s a big world out there. The U.S. makes up a little less than half of the global market cap. By avoiding international stock markets, you cut out half of the investment opportunities. Why limit yourself?

The chart below breaks down the annual performance of the top 12 developed international stock markets. Each country’s performance seems to bounce around at random year after year, but over the long-term those returns smooth out. While it’s difficult to pick the best performing country every year, a diversified global portfolio offers the benefits of international stock market performance which in turn lowers risk.

The table below ranks the best to worst international stock market performance over the past 15 years.

The template for this table was the MSCI EAFE Index including Canada. In total, that’s 22 countries – too many to build a table around. I weeded out the smallest players based on its standing in the index. The top 12 countries represented in the index are shown in the table. Those countries left out – Austria, Belgium, Denmark, Finland, Ireland, Israel, New Zealand, Norway, Portugal, and Singapore – make up about 9% of the index.

Emerging Markets Performance

Some of the fastest growing economies are the most ignored by investors. Part of a global portfolio takes advantage of emerging markets which offer more robust growth than its developed counterparts. But is it worth the risk?

The chart below breaks down the annual performance of the top 12 emerging countries. Try picking the best performing country each year and your chance of success is slim. Over the long-term those returns even out. A global portfolio benefits from the emerging markets performance while diversifying risk.

The table below ranks the best to worst emerging markets performance over the past 15 years.

I used the MSCI Emerging Markets Index as a template for this table. The index measures the markets of 23 emerging countries. Again, that’s too many to stuff into one table. Like the international table, I dropped the smallest countries based on its standing in the index. The top 12 emerging markets are represented. The countries left out – Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, Peru, Philippines, Poland, United Arab Emirates, and Qatar – make up about 9% of the index.

Emerging Market Stocks — MSCI Emerging Markets Index

Annual S&P Sector Performance — S&P 500 Energy Index

RUS Russia — MSCI Russia Index

Реклама

Добавить комментарий »

Комментариев нет.

RSS feed for comments on this post. TrackBack URI

Добавить комментарий

Заполните поля или щелкните по значку, чтобы оставить свой комментарий:

Логотип WordPress.com

Для комментария используется ваша учётная запись WordPress.com. Выход / Изменить )

Фотография Twitter

Для комментария используется ваша учётная запись Twitter. Выход / Изменить )

Фотография Facebook

Для комментария используется ваша учётная запись Facebook. Выход / Изменить )

Google+ photo

Для комментария используется ваша учётная запись Google+. Выход / Изменить )

Connecting to %s

Блог на WordPress.com.

%d такие блоггеры, как: