If you were looking back over the last 20 years for the best performing stocks, you might figure that high tech or internet stocks would lead the list, right?
Instead, an old technology that dates back to 1804 fueled the hottest stock of the last 20 years. The winner was Kansas City Southern, a railroad company that was up an astounding 19,030% over the past 20 years. Part of its success is attributed to its ownership of the Janus Capital Group in the 1990s, a mutual fund company that specialized in growth stocks.
The second best stock was another unlikely company, Middleby, a maker of ovens and restaurant equipment. It gained 14,330% since 1992.
The winners list had some tech stocks, including 10th-ranked Astronics of East Aurora, NY, which benefited by selling products to airlines updating their cabins. It was up 6,004%.
Those unlikely winners show just how hard it is to pick individual winning stocks. Many of the top ten firms were very small in 1992 and not on anyone’s radar.
How might an investor participate in these returns without taking the risk of poor selection, bad timing or lack of diversification? Consider an appropriately balanced portfolio of asset-class and index mutual funds and exchange traded funds. These low-cost, broadly diversified funds participate in the overall market returns without concentrating in a handful of companies. This type of diversification can give an investor the courage and rationale to remain invested throughout the inevitable swings of the markets without the dangerous but common technique of trying to time when to be in or out.
Despite the best research, the short-term future of the markets is unknowable. However, the markets have historically provided patient investors meaningful long-term returns. To learn more about this valuable, time-tested investment philosophy, click here.
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