How many of you have kicked yourself and thought, “If only I would’ve invested in Apple stock 20 years ago!”? Sure, that type of returns is one that anyone would love to have realized, especially considering that two of the worst periods in the stock market occurred during that same time frame. The problem is, that for every Apple, there are a lot more companies that don’t outperform the S&P 500, or worse yet, underperform by a wide margin – Blackberry sure looked good 20 years ago, didn’t it?!
A Barron’s article I came across illustrates how hard individual stock selection can be. I found it interesting to see how the companies in the Nasdaq have changed since 2000:
• Microsoft (MSFT) was the biggest member of the Nasdaq back in 2000; Apple (APPL) is now the Nasdaq’s and world’s biggest company. Apple was less than 3% of its current size at the March 2000 peak.
• Cisco Systems (CSCO) was second on the Nasdaq in 2000, and now barely cracks the top 10.
• Intel (INTC) which was third on the Nasdaq in 2000 with a valuation of $401 billion, but has since dropped to a valuation of $167 billion.
• Many of the top companies traded on the Nasdaq today weren’t public, or didn’t even exist, in 2000. Google (GOOGL) is currently the second largest on the Nasdaq, and Facebook is fifth.
So what’s a person to do? While my answer is inherently biased given the fact that I’m a financial advisor, I truly believe it is in your best interest to hire a trusted financial advisor for investment selection based on your specific goals/concerns, as well as to monitor the holdings regularly. I also believe in passive investing using sector index ETFs, as opposed to actively managed mutual funds, given the difficulty in picking individual stocks that will outperform the index over a 20-year period (since most of us are investing for retirement years from now).
As always, we provide a FREE 2nd Opinion Portfolio Review and would be more than happy to discuss your financial planning goals with you – please click here to schedule your meeting, or give us a call at 913.402.6099.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit http://www.chladekwealth.com.