The Elements of Style

The next three charts reveal the difficulty of identifying a winning style in advance. Figure 6-1 displays the Annual Returns of Asset Class Indexes for the 20-year period from 1995 through 2014 and shows that high and low returns of key market indexes follow no discernible pattern. Figures 6-2 and 6-3 show the same is true for the historical returns of various countries and industrial sectors. Investors who attempt to overweight or underweight specific styles based on speculation about future market movement undermine their ability to achieve the risk-adjusted returns that result from maintaining a proper asset allocation made up of a consistent blend of investment styles.

Figure 6-1

Figure 6-2

Figure 6-3

Step 6Style Drifting