Looking at the Long Term

by: James Picerno

The "long run" isn't everything, but it's something, which is to say it's relevant. Studying it, then, is productive. It shouldn't dominate decisions for designing and managing asset allocation, but it's a great place to start.

The long run is everywhere when perusing the latest edition of Ibbotson SBBI 2009 Classic Yearbook. For the uninitiated, the book is a feast of data, reviewing all the usual measures of stocks, bonds and now REITs and a touch of commodities. Here is the epitome of slicing and dicing the numbers when it comes to investment research, at least when defined in the dead-tree medium. You're not really familiar with the trends and the profiles of the major asset classes until you've spent some time poring over SBBI.

Critics say that SBBI unfairly promotes the long-term perspective, elevating it to god-like status. Perhaps, although there's no shortage of short-run data to consider and so everyone can find their favorite bias in these pages for forecasting risk and return premia and considering how the game unfolded in the past.

We can't possibly do justice here to the treasure trove of statistical insight in SBBI, but we can give you a flavor for what awaits. We're also adding our own contextual spin to the numbers in the next issue of The Beta Investment Report.

SBBI won't give you a short cut to easy profits, but it'll open your eyes to the possibilities, and the risks, in the capital and commodity markets. With that in mind, here are a few choice cuts in the freshly published edition of this grand book…