As I helped a client review his beneficiary designations last week, he joked, “Way to bring up [my] death.” I laughed and reminded him that death remains undefeated throughout human history.
His reply? “The 2007 New England Patriots were undefeated too at one time.” He’s right. They won their first 18 games but lost the Super Bowl to the Giants. I knew he was joking. Still, I wanted to do some quick research to point out why I was confident in my belief that we will all die someday.
Estimates vary, but most agree that at least 100 billion humans have lived and died. I’m confident in that sample size. We can extend life, but we can’t defeat death.
Sample size matters when formulating an investment strategy too. The rising stock market of the past few years brought in many new investors into the fold. Most of them only have a few years of investment experience. They experienced an environment where risk was generally rewarded, buy-the-dip generally worked, and U.S. stocks were clearly better than anything else.
A deeper look at history tells a much different story. Risk and reward are related, but you are not always compensated for taking risks. Buy-the-dip works well for asset classes over time, but not all the time (and not so well for individual stocks). U.S. stocks and international stocks have similar long-term track records.
I’m a numbers geek. I stick with investment strategies that can be tested over decades across all different markets. The more data I can get, the better. I’m not interested in what worked last week, last month, or last year. That will change and is largely unpredictable. My data says a lot of what worked for a short period of time may not be the best over the next ten years
Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.
About the Author: John O’Connor
John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2020.