My brother Ken and I just celebrated our 35th year in business. It was the summer of 1984 when we opened our business, and if I look back over the last 35 years, it is amazing how much our world has changed. Back in 1984, there was no such thing as cell phones, email, texts, bill pay, and the great majority of Americans didn’t have home computers. Back in 1984, a gallon of gas was $1.10 and a ticket to a movie was $2.50, interest rates were 10¾ percent, and the Dow was around 1200.
Over the last 35 years, investors have experienced just about every type of market there can be. From Black Monday where the Dow dropped 25 percent in one day, to the United States losing its AAA rating, the Dot.com bubble, the 2008 recession, and I could go on and on, but I think you get the point. Over the last 35 years, our economy and our country have had its fair share of crises. However, there’s something that’s also true.
Despite all the problems and challenges our economy has faced over the last 35 years, something is also true and that is that despite everything, just like it was 35 years ago, the United States continues to be the strongest economy in the world and the envy of the world. Another truth is that despite all the crashes and market downturns, the last 35 years have seen incredible growth in stock markets; not only here but around the world. What Warren Buffet frequently says is true; it’s not timing the stock market, rather it’s time in the stock market that will make you successful.
As much as things have changed in our world, it is important that as investors, we learn the lessons of the past. That doesn’t mean I believe that the past is going to repeat itself or that the issues we face today are the same that people faced in the past, because they’re not. What it does mean is that you need to take the lessons of the past and apply them to today’s situation. A scam artist today has all sorts of new technology that they can use to try to scam you out of your money. The Ponzi scammers are certainly more sophisticated than they were in the past; however, basically they are no different from the Ponzi scammers 20 years ago, 50 years ago or 100 years ago. If in today’s world people learn the lessons of the past, there would be less victims of financial fraud.
One of the lessons that we do have to learn from the past is that we have to change with the times. Whether we like it or not and as difficult as it may be, we have to change. Just because our parents or grandparents invested their money one way doesn’t mean that you should invest your money that way as well. It means that you learn from their failures and successes and apply that to today’s world. For example, when it comes to saving for retirement, your grandparents may have been thinking about a five- or 10-year retirement where every year they would live on less and less. That is not the reality today. In today’s world you probably have to plan for a 30-year retirement, and as opposed to having a shrinking income on a year-by-year basis, you are going to need a rising income. We all know that 10, 20 and 30 years from now it is going to cost us substantially more to live than it does today.
It is nostalgic when you look back 35 years ago and think how much simpler the world was. I imagine 30 years from now people will be looking back with nostalgia at 2019 saying, wasn’t life simpler back then.
The challenges and issues we face today are different, and in many ways, more challenging that they were in the past. That doesn’t mean that we should forget about the past but rather, use it as a guide for today’s times.
Rick is a fee-only financial advisor. His website is www.bloomassetmanagement.com. If you would like Rick to respond to your questions, please email Rick at email@example.com.