Investment History – How to See Investment History in Technicolor

So how do you get a view of investment history by asset classes?

An easy way to see how different investments have done is to view a Callan Chart. The Callan Chart shows investment history for each year, and different types of investments are displayed from best to worst.

Callan Charts are especially handy for showing investment history because they are brightly colored. By looking at one, you’ll see that the best performing investments change from year to year.

You can go to Callan’s website to see the chart including 2013.

What does the Chart Show?

Across the top you’ll see each year listed. Then, stacked from top to bottom under each year, you’ll see different “asset classes”. Asset classes are just different types of investments that you could have invested in during that year (and you can often find mutual funds that invest in those types of investments).

For example, you’ll see S&P 500, which refers to large US-based companies. You’ll also see Russell 2000, which covers small companies (don’t worry, you don’t need to memorize all of this – the chart includes an explanation of what each color represents).

Callan puts together a nice chart, but some of my favorite versions of the chart include alternative asset classes such as REITs, commodities, and a classification for “Diversified Portfolio”. As you might imagine, the diversified portfolio emerges as a decent looking option – typically around or above the middle, but never at the bottom. The bottom is bad.

Tip: if you want to invest in a diversified portfolio, the easiest way to do it is to use a target date fund or a target risk fund.

So, if you say “what does investment history tell me about the coming year?”, check out a Callan Chart. The answer: not much. The best course of action is to stay diversified. Pick the level of risk that’s right for you, and don’t make changes unless something in your life changes.