With the dawn of a new decade arrives the financial media’s recommended investments.
Articles with attention grabbing titles such as “10 Stock Investments for the Next Ten Years” entice readers with promises of market beating returns.
But should you follow media’s investment recommendations? Consider the following articles published ten years ago.
In August, 2000, a Fortune magazine article presented “10 Stocks to Last The Decade.”
How would these ten stocks have performed if you spread your investments equally among each pick versus the market and a fully diversified portfolio*?
- Fortune’s 10 Stock Investments: -44.21%
- S&P 500: -7.26%
- Diversified Portfolio: +81.04%
Time period – August, 2000 through November, 2009.
Fortune’s stock picks drastically underperformed both the market and a fully diversified portfolio.
A second article by The New York Times asked for Buy and Hold picks from “10 very smart, very successful investment professionals…”
So how did these stock picks fair versus the market and a fully diversified portfolio?
- New York Times: +25.17%
- S&P 500: -4.29%
- Diversified Portfolio: +84.35%
Time period – February, 2000 through November, 2009
The New York Time’s picks beat the market but it seems a passively managed diversified portfolio drastically outperformed these “very smart, very successful investment professionals…”
Think twice before rushing out and investing your money in any of the media’s picks for the next ten years!
Having a financial plan and a fully diversified portfolio based on this plan is the best bet when investing for your goals and future.
*Fully Diversified Portfolio:
Dimensional US Adjusted Market 2 Index: 30%
DFA Equally Weighted Emerging Markets Index: 5%
Five-Year US Treasury Notes: 40%
Dimensional International Market Index: 25%
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