The Heat Map chart displays compound annual growth rates not over a single timeframe, but over all timeframes.  It’s a great way to visually evaluate how a portfolio performs throughout a variety of economic conditions.  Use this to compare how a hot or cold streak stacks up against history, or to see beyond recent returns and rosy averages that may hide a turbulent past.

Chart

Overview

The Heat Map shows the real compound annual growth rate (CAGR) for every investing timeframe of your selected portfolio and home country in a single grid. Each row is a start year and each column adds a year of holding time. So to see how the portfolio treated an investor who bought in 1990 and held for 15 years, find the 1990 row and count 15 squares to the right. Hover over any cell to magnify it and read the exact annualized return. And since every return is a real CAGR (the inflation-adjusted compound annual growth rate), the numbers represent true purchasing power rather than nominal account values.

The colors turn all of that data into an instant picture. Blue cells are gains and red cells are losses, with darker shades marking returns further from zero, and the legend at the top translates each shade to a number. The leftmost column is simply every individual annual return, which is why it looks so chaotic. Watch how the colors settle down as you move to the right, as longer holding periods smooth short-term swings into steadier long-term results. You can study that same effect in more depth in the Long Term Returns chart.

The grid forms a triangle for a simple reason: recent start years have not yet had time to produce long holding periods. The diagonal edge always represents timeframes ending in the most recent year of data.

The Heat Map is probably best utilized to understand the good and bad times for a portfolio at a glance. It’s the full return history of one portfolio in one country, uncompressed. Look for the red patches, and you’ve found the rough stretches often hidden by simple averages. Then look at the same rows a decade later to see how the story played out for investors who stayed the course.

Assumptions

• All returns are adjusted for inflation and expressed in the home country’s currency.
• Portfolios are rebalanced annually, and returns include reinvested dividends.
• Returns ignore taxes and fund fees.
• Calculations cover every year since 1970 for the selected home country.

Discussion

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