Quilts & the Art of Investing

quilt from Pilgrim/Roy collection at MFA

While most people use quilts on their beds for warmth and beauty, our Wealth Management team often uses them as symbols of its investment philosophy.

Recently, the Museum of Fine Arts, Boston exhibited the Pilgrim/Roy Collection of American Quilts, a breathtaking showcase of hand worked tapestries created by women mostly before the turn of the 20th century. Not only did our team take a field trip to the exhibit (see photo), but we could not resist sharing another type of “quilt” and its correlation to the importance of a diversified investment strategy.

Instead of fabric, our quilts are made of paper and are provided to us by our custodian, SEI, to illustrate the performance of all the many types of asset classes–stocks and bonds, real estate and mutual funds, to name a few, over a 20-year period. Formally known as the Callan Periodic Table of Investment Returns, it illustrates the strong case for diversification across asset classes.

Callan Periodic Table of Investment Returns
Callan Periodic Table of Investment Returns

These rectangle-shaped, multi-colored charts are filled with dozens of little colored squares. Each square or asset class has its own color and represents a type of asset and size (stocks vs. bonds, large vs. small, growth vs. value, domestic vs. international, etc.). Over a 20-year time period, each square or asset class has spent time at the top of the chart (best return), the middle of the chart (good return), and at the bottom (worst return), as well as everywhere in between.

The result is a patchwork of squares that looks a lot like a quilt.

Since there is no one asset class or quilt square, if you will, that hasn’t appeared at the top or at the bottom of the chart or somewhere in between over the course of time, we like to see a diversity of investments led by the client’s individual goals and tolerance for risk. This strategy essentially means that the client’s portfolio will maintain a steady and leveraged trajectory and is more likely to result in better performance.

This type of investing is not dictated by the highs and lows of market fluctuations. It is not dictated by emotions or behavioral investing. With a steady hand at the helm (ideally your financial adviser’s), it stays the course in its diversification strategy, and will provide meaningful security to you and your family over the long run.