Look at the illustration above, created by our friends at Dimensional Fund Advisors. It tracks changes in the top 10 most valuable US companies, from decade to decade, over the last century. What do you see?

From one decade to the next, there is not always a huge change in the list. But if you take a longer-term view, there is massive change. Look, for example, at the leading companies in 1990. None of them were in the top 10 thirty years later, and only two lasted twenty years.

If your investment strategy in 1990 had been to focus on the most successful companies of that day … well, the shifting sands would have buried you. Most of you should have a financial plan that spans decades. That’s the timeframe that matters.

Why Diversification Is the Winning Strategy

By contrast, if your investment strategy in 1990 had been true diversification – for example, owning every stock in the world – none of this change would have mattered. You would have been guaranteed to own your fair share of the most valuable companies and not be overly exposed to stocks that fell out of favor.

Three Real-World Examples of Market Shifts

1. AT&T – From Dominance to Break-Up

   In my parents’ generation, AT&T was the most reliable money-spinner in the US. In fact, they were the #1 company by value for 4 decades. Then, the company and the stock were hit by deregulation (AT&T was split up, allowing for real competition from the likes of Sprint) and by new technology (they didn’t keep up – think wireless).

2. IBM – The Fall of a Tech Titan

   In the 1970s and 1980s, as computers became a part of our lives, IBM became the most valuable company in the world. Those of us of a certain age remember the quote which guided many corporate purchasing managers: “Nobody ever gets fired for buying IBM”. It’s hard even to write that today without laughing.

3. GE – From Corporate Hero to Cautionary Tale

   Perhaps the longest-lived darling of corporate America was General Electric, or GE. It stayed among the top 10 most valuable companies for almost a century. While I was at Harvard Business School, GE reached its peak under the leadership of Jack Welch, widely considered at the time to be America’s greatest CEO. We were all supposed to learn from fellow HBS alumnus Welch how to be a great manager and create shareholder value. Today, GE is no more. Many attribute the demise to suspicious accounting, ill-advised acquisitions, and poor management.

Today’s Market Giants: Will They Last?

In 2025, it seems like Apple, Microsoft, Nvidia, Google, Amazon and Meta (Facebook) will rule corporate America indefinitely. History teaches us the odds of that happening are infinitesimally low.

Is your financial plan built on a strong foundation of true diversification – or on shifting sands?