Jim Picerno over at Capital Spectator musters up a fascinating chart:

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Annualized 5 year return by asset class
5yr_returns_1

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Jim notes:

"What jumps out at us is the performance dispersion, which is to say
the robust variety of returns–ranging from more than 20% a year for
REITs down to just over 1% a year for the S&P 500, a.k.a. large cap
domestic stocks. The point being that there’s been no shortage of
opportunity and pitfall in the global capital markets in the last five
years. There never is. The winners and losers keep changing, but you
can always count on a broad assortment of returns over time for the
major asset classes. The not-so-subtle implication: asset allocation
still matters, and more than a little.

The mother of all strategic issues in money management all too often
becomes subsumed in the chase for the next hot stock. But anyone
interested in investment success as a durable notion beyond the end of
the month should ignore the widespread obsession with short-term
tactical."

Remind me again about stocks for the long run . . . ?

Category: Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “Annualized 5 year return by asset class”

  1. royce says:

    Looking at charts like this always makes me think of the way the S&P 500 index looked vs. other alternatives in the 5-period that culminated in 2000. Was it just that REITs were so massively undervalued in 2000 that we can see 20% annualized growth for five years and then a leveling off to more sustainable growth soon, or did irrationality just creep in a few years back to that we’ll see a repeat of the crash and sideways market for REITs over the next five years as valuations become more in line with what we’d expect historically?

  2. PigInZen says:

    I think one of the explanation of the large return for REIT stocks was due to the increased profitability of US corporations as a whole over the same time period. How did this translate in regards to REIT stocks? Well, by law REITs must return a percentage of profits to shareholders via dividends. Hence the growth in value…

  3. RDS says:

    Any thoughts on how the asset class graphic will look in 2011?

  4. Ned says:

    I think gold stocks have beaten REITs over that time period but I may be wrong.

  5. John Navin says:

    I’m with Ned. How can you list asset classes without mentioning gold?

  6. RN says:

    Gold (which James Hamilton doesn’t even consider a viable investment asset class) is up 209% over the same period.

    Gold stocks probably more, but couldn’t say.

  7. links for 2006-01-14

    The Big Picture: Annualized 5 year return by asset class Ritholtz finds this keeper. To quote Cramer, “There is always a bull market somewhere.” (tags: Returns AssetClasses)…

  8. Jim Picerno says:

    Stocks for the long run? There’s no such thing. The reason is simple: stuff happens. Perhaps we should refer to asset classes for the long run. But then the question becomes: which weight for which asset classes. Asset class weights for the long run? But then that implies no rebalancing. Ok, how about a rebalancing methodology for the long run? Now we’re getting somwhere.

  9. Ned says:

    My main problem with stocks for the long run is the built in surviver bias. Companies disappear (remember the early computer and then Internet companies? and creative destruction?) and take their equity with them so the long-term data is corrupt/invalid before you even begin to build your investment thesis. If you buy MSFT at the IPO you can do okay, I suppose but how do you know some Harvard dropout knows what the heck he is doing in the software business. My two cents.