3 Things 9-5
Thing One It’s Not An Accident, But It’s Not A Guarantee Either Warren Buffet pointed out to the virtual attendees of the annual Berkshire Hathaway shareholders meeting that five of the top six companies in the world by market capitalization are American. In clarifying the significance of that fact he shared a list of the top twenty companies in 1989 versus the top twenty in 2021 (see both below). You’ll notice there were only six US companies on the entire list in 1989 versus 13 today. One of the points Buffet made regarding that fact is that it’s not an accident but rather a credit to our system that American companies have prospered over the last 30 years. But he also added that there are lots of companies that were “the place to be” back then that aren’t on anybody’s radar today. That observation was a reminder of the danger of buying into the hype of stock trading (as opposed to investing) as a way of accumulating wealth. And it was also a reminder that America's greatness, either as an investment opportunity or as a country isn’t guaranteed. So, if you’re in the individual stock picking game, do your homework, be patient, have some humility, and get some help if you need it.
Thing Two How Much Should You Have Invested In Stocks? While there are many financial practitioners who will answer this precisely after you provide them with a few pieces of information, there really is no one “right” answer to this question. That said, there are some very useful guides that you can use to help you decide on an appropriate number for your situation. For example, the chart below suggests that if your investment horizon, the period of time from now until you actually need to use the money, is zero to three years, you should not have anything in stocks while if you have more than a twenty-year investment horizon, you should have all of your available investment dollars in stocks. Now, before you run with this, remember there are no absolute formulas and there are potentially lots of things that can make person A’s number different from person B’s. Chief among them would be how the term, "investment horizon", is defined in detail. In other words, what does the end of the horizon represent, death or retirement or something else? Do they need to use all the money at once at the end of the horizon? If they don’t need to use all the money, how much risk are they willing to take with the “spare cash”? The questions can go on and on, but you get the point. It’s a useful guide but not a one-size-fits-all solution. As always, you should know we can help you or people you know and care about work through what makes the most sense in your specific situation. Just reach out or let them know to do the same.
Thing Three Just A Thought "Always remember that you are absolutely unique. Just like everyone else." -Margaret Mead