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A new decade is fast approaching and if you're wondering how to invest for the next 10 years, the story paints a damning picture of what not to do.
Investors might think that it is better to invest in market-leading technology stocks such as
Facebook
(ticker: FB),
Amazon
(AMZN)
Apple
(AAPL) and Google's parent
Alphabet
(GOOGL), but the search for GaveKal Louis Vincent Gave suggests the opposite.
Gave reviewed the top 10 stocks at the beginning of each decade since 1980. His findings showed that the top 10 stocks by market capitalization rarely remained there for the next ten years. Instead, the prevailing patterns of investment have changed dramatically, with former winners being replaced by new ones.
Since the rise of oil in 1980 and 2010 up to the fears of Japanese domination in the early 1990s, investment trends at the beginning of the decade have never lasted, he noted. In fact, if you avoided the dominant trend every 10 years, you would have been leading every decade since 1980, writes Gave. Now it could be technology, whether it's because of government regulation and the abandonment of globalization, or some other factor.
Gave pointed out that one of the main reasons for the high turnover is that size and growth "are difficult to reconcile".
Exxon Mobil
is the only company to remain constantly on the list, with
Microsoft
an honorable mention for having started three decades in the top 10.
"The bigger the organization, the more bureaucratic it will tend to be, the more it will be anchored in its behavior and the less likely it is to take risks and therefore deliver the excessive growth that investors anticipate," he writes. . "Elephants and hippos are very resilient, but they are not as fast or agile as cheetahs or leopards."
We closed by discussing the three types of bubbles: those caused by fear, the greed of new technologies and the greed of the expansion of capitalism. And he leaves no doubt about the fact that he sees technology as a bubble.
"The consensus is that we will truly enter a new world full of modern conveniences that are always better," he wrote. "It sounds appealing and exciting, but let's remember that multi-year investment trends look like very big dogs: they rarely live beyond their first decade."
Instead, he notes, the top 10 stocks by 2030 would likely reflect the growth of capitalism in new territories, or the fear of resources that could benefit commodity investors.
"The Mayas used to believe that history was composed of recurring cycles of 52 years; a concept that fits well with the popular belief that people avoid committing the mistakes of their parents, but repeat the mistakes of their grandparents, "he wrote. "So, maybe in 2030, the market will be ready to return to the belief that democracy can only lead to inflation, while politicians chase the votes with a barely dry cash? "
Write to Connor Smith at [email protected]
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