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Monday, April 19, 2010

BlackRock Periodic Table

DIY investors need to check out this periodic table from BlackRock. A periodic table shows visually the performance of various asset classes over a period of time. Using BlackRock's abbreviations, this periodic table shows 7 asset classes - Lg Cap Growth, Int'l, Sm Cap, Lg Cap Core, Lg Cap Value, Fixed Income, Cash - and (what makes it unique) it also includes a diversified portfolio. The table ranks the sectors and gives actual returns from top to bottom on an annual basis from 1990 - 2009.

The diversified portfolio is basically 35% bonds, 10% international stock, and 55% domestic stock. The specific breakdown is provided in a footnote.

The basic message of these types of tables (Callan also produces a useful one) is how difficult it is to pick the best performing sectors of the market. In fact, you can see how individual investors will have great difficulties as they chase the best performing sectors.

But notice that the diversified portfolio is constantly near the middle. Page 2 of the PDF provides actual returns over the period along with standard deviations. Notice the solid 8.1% return of the diversified portfolio and its relatively low standard deviation.

Recall that this 20-year period was extremely wild with at least two "100 year events" during the 20 years. To me, this speaks volumes in favor of low cost index funds and avoiding market timing for the individual investor. The diversified portfolio provided solid returns with minimal risk exactly what the individual investor is seeking.


  1. I like these historical views of the market and think they are very valuable for some long-term perspective on the markets and also show the importance of asset allocation.

  2. I agree. I had always used Callan's table which is good also because it breaks up the asset classes a bit differently but was interested in this one because of the diversified portfolio.
    In my other life I managed a multibillion dollar bond portfolio which , as you can imagine, was in a performance derby with other institutional managers. The goal was to get in the top quartile. Interestingly, performing consistently in the 2nd quartile over the shorter periods got you into the first quartile over the longer run.
    The managers that hit homeruns in the short term also tended to strike out from time to time.
    This was a real eye opener for me.