I want to continue this video series on “Planning For Change” with three more examples of how things change in the market.
The first is Asset class performance also doesn’t remain constant over time. Intermediate treasury bonds had an over 11% annualized return in the 1980s. Over the past decade (2014-2024), treasuries returned just over 1.3% annually, underperforming inflation. If retirees relied strictly on Treasuries, they would have lost buying power and effectively have far less money today than a decade ago.
The hottest sectors vary over time. In the late 1990s and early 2000s technology stocks saw a meteoric rise. Much wealth was created as investors flocked to invest in technology stocks. Unfortunately, the implosion of the Dot.com bubble saw much wealth eroded. In fact, it took the tech sector around 15 years to fully recover, with the tech stocks finally reaching a new all-time high in 2015. That is a staggering amount of time to experience no returns on your money, just to recover your initial investment.
And finally, Past investment axioms can also change. There is the often-repeated phrase that “real estate only goes up in value.” While real estate has gone down in many parts of the country over the years, which disproves this point, there is no example more potent than during the Great Financial Crisis. During the GFC, the U.S. real estate market was decimated in a few short months. Investors also learned that no company is “too big to fail,” as large historied companies imploded overnight. Companies like Bear Stearns, Lehman Brothers, and General Motors vanished. Many other blue-chip stocks that investors relied on for their “safe” dividend took years to recover their losses.