Monday, December 28, 2009

Smart Money Magazine's 10 Stocks for Next Decade (2000 - 2009)

Ever wonder why many investors say ignore the noise of the market and just keep things simple by investing in indexes?  Take a look at the recommendations from Smart Money magazine in December of 1999 to hold for the next decade.  How prescient were these geniuses?  Try to take a look at the results below without laughing:

AOL (merged with Time Warner in one of the dumbest business deals in modern history, stock went down at least 70% in 2000-2002, such a dog that Time-Warner spun it out in 2009 as its own company to be rid of it)

Broadcom ($91 then, $30 now)

CitiGroup ($29 then, $4 now ...would be bankrupt without the generosity of the government)

Inktomi (stock peaked in March 2000, acquired by Yahoo)

MCI WorldCom (bankrupt, bought by Verizon)

Monsanto (best results on this list, $39 then, $82.69 now)

Nokia ($39 then, $12.69 now)

Nortel Networks (bankrupt)

Red Hat ($105 then, $30.98 now)

Scientific Atlanta (acquired by Cisco in 2005)

How would you have fared investing in these gems and holding for the entire decade?  While I don't have an exact figure, the winners on this list are few and outnumbered by the bankruptcies.  Needless to say, the know-nothing investor who plopped 50% of his money in a total stock market index and 50% in a total bond market index would have a better result than the above portfolio of "winners" picked by the experts.  So what is the moral of this story?  Ignore the noise, keep things simple, take no risk where the odds aren't in your favor.

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