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Hindsight

Sigma Investment Counselors

August 23, 2017

Periodically, someone points out that an investment of a small amount, say $10,000, in a major successful company such as Amazon, Microsoft, Berkshire Hathaway, etc., twenty or thirty years ago, would have provided an exceptional investment return.  Isn’t hindsight wonderful?

The real question is how should you invest $10,000 now?

Realistically, correctly identifying the next big success, at an early stage, is a daunting assignment, with very long odds.  The landscape is littered with investment opportunities that looked promising at the time, but subsequently proved to be either a total failure or just a mediocre performer.

While not nearly as exciting as correctly finding a big winner, investing $10,000 in a diverse portfolio, such as an S&P 500 ETF, and continuing to do it every year, is likely to provide a meaningful return, with a higher degree of probability.  For example, investing $10,000 in a diverse portfolio each year, assuming a 7% average annual return, would give you a portfolio of more than $400,000 after twenty years and nearly $1.0 million in thirty years.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

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