Your investments:
- Drop in value by 10–15%, every year;
- And by 30-50% every 3 to 5 years;
- And recover their value within 12 months, 75% of the time;
- And recover their value entirely in time 100% of the time;
- Produce an average annual return way more than inflation thereby making you wealthier and wealthier.
It is taken as read that:
- Temporary declines are more acceptable than the permanent loss inflation inflicts;
- We never know when a correction will begin;
- Or end;
- The correction will be temporary.
The above applies to sensibly diversified investment portfolios. In our book that means the large majority of your money is invested in the biggest and most successful companies around the world.
Any deviation from that strategy – into bonds, sectors, themes, alternatives, etc. – increases both costs and the risk of permanent capital loss unnecessarily.
Why deviate from something we know is successful to something we know is not?