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Mondial Chart of the Week: Keep Calm and Diversify 馃搱

23 August 2020

Source: Bloomberg聽&聽Momentum Global Investment Management

What this chart shows This chart shows the calendar year returns of nine major asset classes for the last ten years (in US dollar terms), with the data for 2020 to the 14th August 2020. Asset class fortunes clearly vary each year and there are a number of examples when one year鈥檚 star performer turns out to be next year鈥檚 disappointment (see emerging market equity from 2017 to 2018), or vice versa, when the class straggler jumps to the front (see US high yield bonds from 2015 to 2016). Why this chart is relevant The message from this week鈥檚 chart is a simple one. It is extremely difficult to select the best performing asset classes year in, year out. Winners rarely stay as winners (though the US equity market has done its best to challenge this in recent years!). An extension of this point is it鈥檚 very hard to generate strong, consistent returns by investing in just one or two asset classes. Diversification is so important, and it protects investors from the wild swings you can experience in individual asset classes each year.

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