Just One Question
The year is 1885.
Horses were the main mode of transport and carriages were all the rage.
One day, you were opening up a bottle of wine after a long day when a genie rose up from the spout. He gave you the opportunity to ask 1 question, to which he will provide an absolute answer.
Being an investor, you realised you had the opportunity of a lifetime.
You asked, “Which industry will skyrocket?”
The genie replied, “I’ll do you one better, I’ll tell you about an industry that doesn’t even exist yet. There will be an invention called the ‘Automobile’ which will later be known as Cars in the future. It will completely wipe out horses and carriages as the main mode of transport for the entire world.”
And as magically as it appeared, the genie vanished.
Armed with that knowledge that only you had, you were able to predict the coming demise of the horse industry. You sold all your shares in horse-based transport companies before they declined and invested your money into the automobile industry.
Over the next few decades from the 1900s, the stables had turned, at least two thousand companies entered the auto business because it obviously had an incredible future.
Fast forward to 2009, out of those 2000 companies, only 3 were left; out of these three, two went bankrupt. Across the years of your life, can you be sure you invested in the right companies?
Predicting the future of an industry is not enough to ensure a winning investment strategy. This is evidenced by the fact that it is incredibly hard for companies to survive, let alone prosper over long periods of time.
Source: Dimensional Fund Advisors
The data shows us over 20 years less than half of public companies are still being traded on average.
Surviving in itself is hard, let alone beating the broad US market. Only a minority of stocks achieve this feat — about one third of stocks over a 5 year periods on average; over 20 years that number decreases to little more than than 1 in 5.
This story tells us that even if you had superior information, you might still miss the returns owed to you — research has shown us that a diversified market portfolio will capture all the returns that are owed to the investor.
If you have questions such as:
Everyone is advising me to invest in the next disruptive technology/industry, if I don’t do that then how should I invest?
How can I invest and grow my money in a reliable and predictable way?
How do I ensure that my investments do not go to zero?
Due to the unique market conditions that we are in, we have specially dedicated a team to address such concerns. Click here to schedule a 30-minute pre-discovery sessions where we can have a chat with you to better understand your concerns.