Patchwork Quilt of Investment Returns
Chart of the Week for February 26 - March 4, 2010
The Patchwork Quilt of Investment Returns ranks key market indexes, representing different asset classes, in order of calendar year performance. Each asset class's performance is measured by the performance of its corresponding index in the color-coded legend below the chart. The asset class with the best calendar year performance is on top, and the asset class with the lowest calendar year performance is at the bottom of the chart. A top ranking does not mean the asset class produced positive returns.
As the chart illustrates, asset classes can rotate in and out of relative favor depending on factors such as economic conditions and market sentiment. While bonds, as represented by the Barclays Capital U.S. Aggregate Bond Index, were the second-worst relative performer in 2009, they were the top performer in 2009 and for three straight years at the onset of the decade. Likewise, international equity, as represented by the MSCI EAFE (Net) Index, vaulted from being the worst-performing asset class in 2000 and 2001 to topping the charts for four straight years from 2004 to 2007.
Because it is so difficult to "time the market" and predict which asset class will outperform in a given year, investors should consider investing in a balanced and well-diversified portfolio instead of investing too heavily in any single asset class.
This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.
Investment information can change rapidly and the changes can be significant particularly in volatile markets. For this reason “as of”’ dates are provided for specific data where applicable. The information should not be considered current after the dates provided.