The world was a very different place 17 years ago today. Jenifer Lopez had a US number one with ‘If you had my love’. In Australia the most popular song was US RnB supergroup TLC with ‘No Scrubs’.
Slobodan Milosevic agreed to withdraw troops from Kosovo. This led to NATO suspending airstrikes to the region.
It was also around this time 17 years ago that eight bodies were found in barrels in a disused bank vault in Adelaide. The Snowtown murders would become one of Australia’s worst ever serial killings.
John Howard was also three years into the Prime Minister job. Jeff Kennett was Premier of Victoria. Bob Carr was Premier of NSW. There are a few names as a blast from the past!
Interestingly, around this time estimated price indices for computers and semiconductors could show that a computer cost one-ten thousandth as much as a computer in 1960.
Australian government debt to GDP was at about 22%. Household debt to GDP was at just over 60%. And the minimum wage was around $384.40.
It was also in 1999 that the Australian Stock Exchange All Ordinaries was at about 2,950 points.
You could buy a company like BHP for $11.22 a share. The newly floated Telstra was at about $8 a share.
And in what would prove to be the greatest Premiership theft of the 90s, the Kangaroos would take the AFL Premiership flag from the Blues later in the year.
The US president — someone with the name Clinton — was leading the world’s largest economy.
…Hmm…perhaps 1999 wasn’t all that different to today.
Actually it was, because the US Fed interest rate was at about 5%. The Australian RBA cash rate was 4.75%. The RBA cash rate was cut to 4.75% in December 1998, after gradual cuts all the way from December 1994. It would stay at 4.75% until November 1999, when it was increased by 0.25%.
Do you really have as long as you think?
That was a sign of the times. Things were pretty good in the late 90s. Heck even the median house price in Melbourne was $175,000. In Sydney it was $272,500.
What most people wouldn’t give to have another crack at life back in 1999.
The good news for people and businesses in 1999 is that they would live to benefit from one of the great economic booms in history.
Let’s not mistake this for skill. Most people that bought property, invested in stocks, or had money in cash, bonds, or any financial instrument in the late 90s benefited from luck.
Don’t underestimate the element of luck. And certainly don’t confuse luck for skill. If you bought a house in 1999 you probably did so because it was the ‘next step’ in your life. You certainly didn’t anticipate that 17 years later you would benefit from one of the greatest property bubbles in history.
Likewise if you invested in the ‘All Ordinaries’ in 1999 you probably just ‘lucked in’ to the fact it would almost double in 17 years.
2,950 points. That was the ‘All Ords’ in 1999. 17 years later — even after a couple economic bubbles, a huge global financial crisis and everything else — things still look great compared to 1999.
Today the ‘All Ords’ are at 5,414 points. That’s an 83% gain. And I tell you what, for most investors an 83% gain over 17 years isn’t too shabby. In fact, for your average stable investor that’s pretty solid gains.
But is it?
17 years. Think about that for a second. What have you really achieved in 17 years? For some people 17 years means the difference between birth and moving out of home. For some it means the difference between climbing the corporate ladder and retirement. For some it means the difference between retirement and death.
17 years might not sound long. But it’s an eternity.
If you’re a serious investor, do you really have a 17 year horizon? Sure we all know the fundamentals of investing mean a long term horizon. That’s real investing. Short term is trading — long term is investing. We all know that.
But do you really have the long term timeframe you think you do?
I ask this question because occasionally we all realise our lives can be incredibly short. You can be up and about, full of life one day. The next day you’re dead.
Adapt and be flexible to hit all your goals
I apologise if that’s morbid. Heck it might even be depressing. But sensibility sometimes has to be disturbed by reality. Yes I hope (and I’m sure you do) that you’ll be around to live, enjoy and build your wealth well into your centurion life. But the reality is that might not be the case.
That why one single strategy is a fool’s errand. Are you planning to build your wealth for when you’re retired and 65, 70, 75? That’s great. But what if you fell off the perch at 65? What if you died tomorrow? How would your 30 years strategy play out then?
Or perhaps you already realise this. Maybe you live each day as it comes.
You live for the moment. That’s also great. But what if you live until you’re 110? Will you be able to survive? Can you keep your head above the poverty line?
Here’s the best advice you’ll get this year. Or perhaps ever. You need to implement multiple strategies in your investment life. When it comes to investment, building your wealth, providing for your family or generations after – you need multiple strategies.
That means setting aside cash and investments for today. Also for the next 10 years. Some for the next 20, 30, 40 and 60 to 100 years away.
That might mean five, six, even a dozen different strategies. Set some goals. Reverse engineer a strategy to hit that goal. Then go after it.
To put it simply, what you want to achieve in two years will always conflict with what you want to achieve in 60 years. Different and multiple strategies can help work towards both goals. Do not feel that you have to pigeonhole yourself into one wealth building strategy for life.
You can work toward multiple goals at the same time on different strategies. Yet to many people this idea seems foreign, unwelcome…something from a bygone era.
If you’re in your 20s, think short term. And medium term. And long term. Work towards each period of life. If you’re in your 60s, think short term. And medium term. And long term.
It doesn’t matter your age. You should always have short, medium and long term goals. Never just rely on one strategy. Invest in ways that can help you achieve all your goals, and you might just end up hitting them all.