Pursuing a Better Investment Experience – Decision 7: Avoid Market Timing

Even with a globally diversified portfolio, market movements can tempt investors to switch asset classes based on predictions of future performance. But as shown in the below table, there is little predictability in asset class performance from one year to the next.

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This table features annual ranked performance of major asset classes in the US and international markets from 2001 through 2015. The asset classes are represented by corresponding market indices.

The data shows no obvious pattern of performance across asset classes, suggesting that predicting future performance is a difficult task. The chart offers additional evidence of market efficiency and makes a strong case for investors to rely on portfolio structure, rather than market timing, to pursue returns.

In US dollars. Chart is for illustrative purposes only.

US Large Cap is the S&P 500 Index, provided by Standard & Poor’s Index Services Group. US Large Cap Value is the Russell 1000 Value Index. US Small Cap is the Russell 2000 Index. US Small Cap Value is the Russell 2000 Value Index. Russell data copyright © Russell Investment Group 1995-2016, all rights reserved. US Real Estate is the Dow Jones US Select REIT Index, provided by Dow Jones Indexes. International Large Cap Value is the MSCI World ex USA Value Index (net dividends).. International Small Cap Value is the MSCI World ex USA Small Cap Value Index (net dividends). Emerging Markets is the MSCI Emerging Markets Index (net dividends). MSCI data copyright MSCI 2016, all rights reserved. Five-Year US Government Fixed is the Barclays Capital Treasury Bond Index 1–5 Years, formerly Lehman Brothers, provided by Barclays 2016. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.