The 1980s, often dubbed the “Decade of Greed,” was a time of flamboyant style, groundbreaking music, and, most notably, a shift in financial strategies.
The era saw the rise of the yuppie, the young urban professional with a well-paid job and a penchant for luxury. It was a time when the stock market became the playground for the masses, and investment strategies evolved to suit the ambitious and the daring. Here, we delve into nine wealth-growing tips from the 1980s that remain relevant to the investors of today.
1. Start with the Big Picture
Michael Milken, a controversial 1980s investing icon due to a previous (then pardoned) conviction for securities violations in 1989, emphasized the importance of starting with the big picture. He advised investors to identify global shifts that will affect many facets of life and then find investment opportunities in those shifts. “The best investors take a look at the world on a macro basis and then try to figure out, looking at the macro basis, for the best ways to deploy,” he said, per USA Today. “We are quite often surprised how little research people do and how divorced they are… from the real world.”
This approach allows investors to tap into lucrative moves that few investors see coming, providing a strategic advantage in the market.
2. Know When to Be Afraid
Managing risk is crucial in investing. “The greatest risk often comes when investors perceive no risk,” Milken noted, urging investors to be conscious and intentional about the risks they take. He suggested investors avoid the folly of assuming safety in seemingly secure investments, such as government debt, which has shown poor long-term performance.
3. Invest in Future Dividend Payers, Despite Current Temptations
Milken cautioned against solely seeking companies with large dividend yields. Instead, he recommended investing in companies that might prove to be the biggest dividend payers in the future, emphasizing the higher rate of return on such investments.
4. Know Your Limits
The 1980s saw a trend in investing in passive investments like index funds. However, Milken criticized this approach, stressing the importance of expertise in finding big opportunities or avoiding pitfalls. If you lack expertise in a sector, invest with someone who has the knowledge rather than diversifying blindly.
5. Embrace the Bull Market
The 1980s were marked by the growth of the bull market, offering prosperous opportunities for small-time investors. “The reduction in inflation and tax reforms during this decade played a pivotal role in shaping investment strategies,” Bill Sing from the Los Angeles Times remarked in late 1989, allowing individual investors to reap substantial benefits from the market’s upward trajectory.
6. Leverage Technological Advancements
The evolution of stock trading from the 1980s to the present day has been marked by increased ease and accessibility due to technological advancements. As Victor Cianni, chief investment officer at Alpian, noted, “The limitations and barriers of the 80s have given way to the democratization of finance,” allowing individuals to trade easily and access a plethora of information and training materials online.
7. Focus on Long-Term Strategies
The 1980s emphasized the importance of looking beyond short-term gains. The decade’s investment strategies were rooted in long-term performance and sustainable growth. Investors were encouraged to look beyond immediate returns and focus on the enduring success of their portfolios.
8. Embrace Financial Innovation
The 1980s was a decade marked by the introduction of numerous innovative financial products and instruments, such as zero-coupon bonds, interest-rate swaps, and futures options, per Nate Nead, principal at Deal Capital Partners. “Both creativity and necessity brought about the growth in various financial instruments of the 1980s,” said Nead, emphasizing how these innovations opened up new frontiers for trading and asset exchange.
9. Increase Sophistication in Investment Strategies
The introduction of innovative financial instruments in the 1980s required increased sophistication and understanding from investment bankers and investors. Developing a deep understanding of various financial instruments and markets can help investors make more informed and strategic investment decisions.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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