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.
If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets you have landed at the right spot. I am a fee only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.