Expert Bust #12 – Long-term focus

If you could only invest in one of 2 markets and you knew the growth would play out in the next 25 years as follows…

…which would you pick?

It seems obvious until you see this…

Sell out of A after 5 years and buy in B.

This will only work if the growth difference between A and B over those first 5 years exceeds the cost of selling and buying again.
Loads of industry experts will tell you that Xyz has outperformed the national growth rate over the last 30 years. But they ignore how that growth played out. Here’s an example…

Yes, 700% growth is pretty impressive (Hawthorn) compared to 400% (Australia) over those 28 years. But it was neck and neck for most of that. Hawthorn is not a “long-term” out-performer. It’s a “recent” out-performer.

Capital growth over almost any 10-year period dwarfs the growth over the prior 50 years. That’s the thing about compound growth.

It’s far more likely to have “above average” growth over the short-term than over the long-term…

If you want to outperform the averages, you probably need to have a short-term focus.