With US Stocks surging to new highs each week, it is a good time to revisit portfolio allocations, as well as history and see what we might learn from our past experiences. While "past performance is not indicative of future results," it is also said "history does not repeat, but it does rhyme." A recent piece that highlights the ever-changing nature of markets from Dimensional Fund Advisors demonstrates how stocks ebb and flow, just as the tide or nature changes it's course.
For the first ten years of the 2000's, US Stocks underperformed a diversified portfolio, as well as other asset classes, such as Small-Cap stocks, International and Emerging Markets. Low valuation and underperformance during the first decade 'primed' the pump for the strong-run we have seen in US Stocks since 2010. However, what might the future hold? Certainly trees do not grow to the clouds, so at some point in the not so distant future, US Stock valuations will fall and other asset classes will rise.
As there is no reliable, efficient or affordable way to 'time' when the next strong asset class will outperform, the smart strategy is to own the right asset classes, in the right amounts, appropriate for your plan, age, and risk tolerance, so that when it does come time for it to shine, you already have a piece of it. Nothing is static and needing to prune your portfolio over time as will occur is important, too! We hope you enjoy the following piece and feel empowered that when investing properly markets can be our ally in achieving our financial goals!