The future returns for your portfolio are what's going to happen in the future, not what's happened in the past.
"Past performance is no guarantee of future results." Something along those lines.
But it's more complex than that.
A business that has done very well over the past decades won't necessarily continue to keep growing. Business models can change. Competition can emerge. There are many global examples.
Look at Blackberry – it was a world leader of smartphones and now its phones have disappeared in only a few short years despite the obvious long-term growth of smartphone usage.
Look at department stores – Myer Holdings Ltd (ASX: MYR) and many American ones were key shopping destinations. Competition, poor management and online shopping have caused their downfall.
A business may have been a great investment in the past, but it's not always going to be.
Therefore I think it's important to always focus on what's going to happen. Our holdings should be businesses that are driving the change in the world such as Altium Limited (ASX: ALU), REA Group Limited (ASX: REA) and Xero Limited (ASX: XRO).
Or, we should focus on businesses that look as though they will be around many years into the future – that's what Warren Buffett does. It's hard to see businesses like Costa Group Holdings Ltd (ASX: CGC), Rural Funds Group (ASX: RFF) or Duxton Water Ltd (ASX: D2O) being disrupted.
However, I don't mean what's going to happen over the next year. To outperform the market we have to invest in shares with at least three or more years in mind.
Foolish takeaway
I plan to hold most of my shares for at least a decade, assuming their business models don't become disrupted. Selling if their valuation becomes far too high is also a worthwhile consideration.
