I was going through some old magazines I had saved for one reason or another when I came across an article in the Aug. 14, 2000 issue of Fortune, entitled “10 stocks to last the decade.” The timing of the article was interesting. We were five months into the three-year-long millennium bear market and this article was written during one of those sneaky rallies that often occur early in the market decline. Just for grins, I thought I’d see what would have happened if you had put $10,000 into each of the ten stocks back then and discover what you would have wound up with seven years later.*
$100,000 becomes $52,437
The best stock bet of the 10 was Genentech, where it looks like $10,000 turned into $17,569. The worst choice was Enron where $10,000 turned into ? let’s call it zero. It appears Morgan Stanley roughly broke even after they spun off the Discover card, and you would have had losses in the remaining seven. All told, your $100,000 investment in 2000 would have been worth $52,437.22 in 2007. Unless the writers were talking about a different decade, it doesn’t appear that their decade picks have done very well.
People like lists that claim to predict the future and financial magazines are written to give people what they like. Even a pedigreed magazine like Kiplinger included recent column pick lists featuring “low-risk buys” and “sleep-tight stocks” because they know we want someone to remove the uncertainty and tell us what will happen tomorrow. But they can’t, and often these fortune-telling lists cause us to make decisions that are not in alignment with our financial needs and goals.
No one can predict the future (and we probably should quit reading articles written by those that think they can).
There are, however, some things that do seem to work. If you understand the difference between risk and volatility you will be less likely to be spooked and react to short-term events – the “buy high/sell low” syndrome. If you understand diversification you won’t create a portfolio of a hundred mutual funds that still all moves in the same direction. And if you understand yourself you will know whether you have the emotional tolerance to handle the swings of the market, or should instead keep your money in safe money places. Perhaps the most important thing is to realize that no one can predict the future and to quit reading articles written by those that think they can.
* I assure you this is not investment advice but merely for educational purposes, and it is not a recommendation to buy or sell any security. Also, although I believe everything is accurate – including any dividends I found that I added to the total return – I won’t guarantee every bit of the data because some companies merged or split or disappeared making my calculations a mite worrisome. The stocks were Broadcom, Charles Schwab, Enron, Genentech, Morgan Stanley, Nokia, Nortel, Oracle, Univision and Viacom.
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