When looking back on the past decade, most investors realized favorable returns. It’s easy to have hindsight bias and wish you had invested in the absolute best performing asset class(es). For example, you might look back and wish you had over-weighted investments in the US technology sector. However, in the earlier decade (2000-2009), US technology stocks had negative returns (see graph here). Unfortunately it is difficult to predict the top performers in advance. Holding a diversified global portfolio ensures that clients have exposure to a wide variety of stocks (inevitably some assets classes will have higher returns than others). Take a look at the returns for several assets classes in the 2000-2009 vs 2009-2019 periods*
The returns for the past decade (2009-2019) are almost a mirror image of the returns from the previous decade (2000-2009). It’s a good reminder for clients to stay diversified in 2020 and beyond!
*Chart data sourced from Practical Investment Consulting, and Zephyr