How to Invest for the next 25 years

Thinking about investing for the next 25 years might sound absurd to the average person. If you're 25 years old today, you'd be 50 at the end of this investment horizon! That's a REALLY long time. It's a quarter of a CENTURY (QC).

We often say things like, "I wish I bought Apple in 2000 or Amazon after the dot com bubble crashed, if I did, I'd be a multimillionaire".

Or, as seen on my Twitter timeline, "someone offered to pay 20 bitcoins for doing xxx, if I took that payment in 2009, it'd be worth $20 million today!"

If you bought US$200 worth of bitcoin in the dip of 2010 and held till last year when Bitcoin crossed US$100k; that bet would be worth $100 MILLION! That's "just" 15 years.

So, we DO think about investing for 15/20/25 years. The problem is they only think about it in HINDSIGHT.

To become a deca/centimillionaire from investing in (most) stocks that grew exponentially, you need to buy the stock and sit on your hands (or buy more) for 15/20/25 years! I.e. DO NOTHING! Take a really long-term view on the asset. Sounds easy in hindsight but it's incredibly difficult in real time.

Why?

Because in the time Bitcoin increased 10,000%, it grew 200%, 500%, 700%, 1,000% etc. how confident are you in your ability to hold an asset even when faced with juicy gains? how confident are you that you'd be able to look beyond 1,000% profit and imagine 10,000% gains?

In hindsight? Very confident. In real time? I know I wouldn't be too confident.

For example, Masayoshi Son sold Nvidia in 2019! At the time, (ChatGPT claims) he made a $3.3bn profit on a $4bn investment he made in 2017 which is a juicy return (remember, this is ChatGPT's numbers. Please feel free to fact check me/ChatGPT!).

However, that stake would reportedly be worth $160bn today!

There are so many stories like this.

Investing for 25 years is hard, but everything worth pursuing comes with a little pain. The trick is not minding that it hurts. Saying "I want to invest for 10/25 years" is a bit like standing at the base of Mount Everest, pointing to the top and saying, "That's where I'm heading". That's the easy part. Now comes the test.

I love trilogies so here are 3 lessons to help you pass that test and invest for the next 25 years.

Lesson 1: The next 25 years are not likely going to look anything like the last 25 years.

If you know where we've been, you'll know we have NO IDEA where we're going.

The world will look completely different in 25 years when compared to today. The winners of today will most likely not be the winners of tomorrow.

Here are just 4 things that are very different today vs 25 years ago.

1. At the start of 2000 we’d never heard of iPhones, iPads, WhatsApp, Twitter, Facebook, YouTube, Amazon Prime shopping, and Uber amongst many other things. Instead, we had A-Z map books, Nokia phones, Discmans, fax machines, tube TVs, and floppy discs.

2. Global mobile phone subscriptions went from around 500 million in 1999 to 9 billion today!

3. In 1999, only 5% of the global population used the internet. By 2023 67% used the internet, and in high-income countries 93% do!

4. (World) Power changed hands: At the start of the quarter century (the year 2000), China was not the global force we know it to be today. China's GDP in US dollar terms was only 12% of US GDP in 2000. At the peak in 2021, it was 75%! On the other hand, Japan's economy went from being close to 50% of US GDP in 2000 to less than 15% today! As a share of global GDP, China went up from 3% to 17% in dollar terms over the 2000-24 quarter century while Japan has dropped from 14% to just under 4%. Power changed hands.

Lesson 2: The price you pay matters. It always matters!

It only looks like it doesn't matter over short periods of overexcitement. But over the long term, the price you pay for an asset matters.

If I asked what the best performing asset in the last quarter century was; what would be your guess? probably US equities? They have Nvidia, Apple, MicroStrategy and so many stocks that grew astronomically. PS: it can't be bitcoin because it's not old enough.

That guess is wrong!

The answer is GOLD

In real terms, gold increased 6.8% per year over the last quarter century while US equities only grew 4.9% per annum over the last 25 years.

Why did Gold outperform?

The starting point.

At the start of 2000, US equities were benefiting from the dot com bubble. US equity prices were high. When the price you pay is high, you need the price to get even much higher to make a decent profit. That doesn't always happen.

If you’d invested in the S&P 500 at the beginning of 2000, it would have taken until 2013 before your total return moved ahead of T-Bills, and 2017 before they moved ahead of US Treasuries more broadly.

The price you pay matters!

Lesson 3: We are pretty good at predicting the future, except for the surprises--which tend to be all that matter

The one event that has shaped the 2020s so far has been COVID. Almost everything significant happening to stocks today can be traced to COVID. How many people predicted COVID in 2016 when they were writing their 5-year outlooks? Or in 1996 when they were writing their 25-YEAR outlooks?

We cannot predict what the next "black swan event" will be, but we can guess that it'd shape the world in significant ways.

So how and where do you invest for the next 25 years?

5 key themes will likely drive your choice

1. Demographics

2. Geopolitics

3. Inflation & Government Intervention

4. Rising Wealth Inequality

5. Technology

Where do you invest? Is the answer stocks? If yes, do stocks always win?

I had to break this article into 2 parts because it was getting a bit long. Next week, I'll explain my answer to how and where can you invest for the next 25 years. I look forward to sharing that article with you.

Some cool books that'd help you think about the next 25 years