The first decade of the 21st century has been called a “Lost Decade” for investors. During that time, the U.S. stock market went through two bear markets before ending up flat for a ten-year period. This month marks the anniversary of a robust rebound. A regression to the mean known as a “Found Decade.” In early March 2009, the financial crisis hit its bottom, at least as far as the stock market was concerned. From that time, until March 7, 2019, the total return of the S&P 500 has been 408%.
Should we make investment decisions based on past performance?
The answer is no. Because that is making forward decision with a focus on the rear-view mirror. What we can learn from this chart is that during a period where stocks left much to be desired, bonds did their job. They preserved principal and paid steady income. An investor in 2009 had a choice to make. Do the last ten years tell me anything decisive about the years to come? Here is the chart of the next ten years for stocks and bonds:
- It is out of our control. Past performance, while interesting to look at, is as out of our control as the future.
- It can show us the possibilities. The past can’t tell us how an investment will perform in the future. But it can tell us what is possible. Stocks can be volatile. Bonds can underperform in a bull market. As investors, we should behave accordingly.
- Market cycles can last a long time. Patience can and will be tested. But that is why investing is a “get rich slowly” exercise.
stay focused
- Cost
- Comparison to similar assets
- Risk levels
None of these aspects will predict your returns. But these three features are within an investment manager’s control. This is not so with the performance of the markets. Be wary of looking backwards, you may miss the opportunity to come. Contact me at dmorton@mortonbrownfw.com if you want to talk this through.
Morton Brown Family Wealth LLC is a registered investment adviser. This information is not provided as legal or tax advice but for information purposes only. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and therefore can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Morton Brown Family Wealth (“Morton Brown”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Morton Brown. Please remember to contact Morton Brown, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Morton Brown shall continue to rely on the accuracy of the information that you have provided. Morton Brown is neither a law firm, nor a certified public accounting firm, and no portion of the content should be construed as legal or accounting advice. A copy of Morton Brown’s current written disclosure Brochure discussing our advisory services and fees continues to remain available on our disclosures webpage. Please Note: Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.