Diversification & US Dominance with Charlie Bilello
Q: You’re very active on Twitter but unlike most, you tend to share only facts and data, not opinions. How do you view your own place in the community of investors on Twitter, and the value your content provides investors?
A: Like everyone else, I have some strong opinions, but I try to keep them to myself as much as possible and let the data/evidence speak for itself. I think there’s often value in simply presenting a chart/table without bias, letting the viewer interpret it as they see fit. That can lead to interesting discussions at times, with some using a tweet of mine to further a bullish outlook while others use the exact same tweet to argue for a bearish outcome. These differences of opinion are what make a market.
Ultimately, my goal for the content I produce is to simplify the complex, give context to market movements, and help mitigate harmful investor behavior.
Q: The visual you created shows historical returns for 15 different asset classes. What insights does this data reveal about asset class performance since 2008?
A: I use this table to illustrate a few important points…
Benefits of Diversification. It is impossible to know which asset class is going to be the best or worst performer in any given year. As you can see, it changes all the time. In 2018, Cash (BIL ETF) outperformed everything else. This year, Cash (BIL ETF) is the worst performer. By diversifying across asset classes and geographies, you avoid the need to predict the future (which is impossible anyway) and can focus instead on finding an asset allocation mix that is best suited to you.
US Dominance and Avoiding Recency Bias. US stocks (SPY/IWM) have had quite a run since 2008, trouncing International Developed stocks (EFA) and Emerging Market stocks (EEM). Recency Bias (projecting the recent past into the future) is leading many to say this will continue going forward. That could happen, but historically the performance of US stocks versus the world has been cyclical, with periods outperformance followed by periods of underperformance.
Record-Low Interest Rates and Bond Returns. Long-term interest rates in the US hit record lows this year (30-year treasury yield at 1.94%), and have been falling since the early 1980s. Bond returns have been remarkably strong as a result (see TLT ETF this year). Investors should not assume that this is repeatable. The single best predictor of future bond returns is the starting yield. With yields near all-time lows, your expectations for long-term bond returns should be near all-time lows as well. If they’re not, a downward adjustment is warranted.
Q: How long have you been using YCharts and how do you leverage it most?
A: I’ve been using YCharts for a few years. I’m a big fan of using visuals to simplify complex or dense material. The “picture is worth a thousand words” adage really applies to markets and investing. YCharts gives me the ability to easily extract data so that I can present it in a way that is engaging to students, casual observers, and fellow professionals.
Q: Is there a secret tip or favorite feature that you’d like to share with other YCharts users or someone considering trying out the platform?
A: I don’t know if it’s a secret, but I would encourage everyone to utilize the chat feature if you need help with anything. The support team is responsive and they know the product well. They can save you a lot of time in finding exactly what you’re looking for or a more effective way of doing your research.
Some of my favorite tools are the Stock and Fund Screeners, where you can easily sort securities based on a seemingly unlimited number of metrics. Here’s one example of how I used the screener to rank S&P 500 companies by various data points…
Q: You use YCharts to share insights on Twitter. How would you say our platform helps you communicate with clients and peers?
A: I believe education is an edge and that sharing accelerates growth. The YCharts platform helps me do my job more efficiently, giving me more time to learn and think of creative ways to help educate others.