“What is Past is Prologue” is a famous line from the William Shakespeare play The Tempest. How could it possibly apply to stocks? When we are in the midst of a frenzy, investors frequently get swept up in the moment and can’t see how a company could ever fall off the leading edge.
What was leading edge technology at the time can become dated and a smaller part of our economy going forward. Entire industries can have less of a impact on our economy over time (think big energy companies right now represented by firms like Exxon and Chevron). If you look at the above chart, you will see common names we all know moving into and out of the 10 largest firms over time.
Back in the year 2000, Apple hadn’t even made their first Ipod let alone their Ipad or Iphone which have led them to being one of the top ten companies in the 2020’s. Fortunately for retirement plan savers, you don’t have to discover the next Apple, Microsoft or Google. Through investing in a broadly diversified portfolio of companies, you will be able to take advantage of future technological advancements and industry changes paycheck by paycheck with ongoing investments into your retirement plan. Retirement savers needs to focus less on elections, the next big thing, or their ability to pick winners over losers and focus on the items they control. Spend less then you make, save regularly into your retirement plan at aggressive savings rates, and don’t borrow from your future self.