If someone had asked you back in July 1999 what would be the best investment for the next 10 years, you might well have answered: technology. Of course, that would've turned out to be a terrible choice. The right answer would have been gold, or natural resources at large, despite their big decline in 2008.

Investors often miss large turning points in the market. But there are reasons to believe that some of the trends that have worked over the past 10 years will keep working for some time.

U.S. Asset Class Returns, July 1999 - July 2009

Gain (Loss)

Gold

267%

Long-Term Treasuries

110%

High-Grade Corporates

79%

Commodities

66%

Real Estate

62%

Three-month T-Bills

38%

S&P 500

(26%)

Source: Haver Analytics, Gluskin Sheff.

What's worked and what hasn't
Looking at the numbers, gold clearly reigns supreme. The yellow metal has posted a 267% return for the decade ending in July, according to Gluskin Sheff. Bonds have also performed well, with returns of 110% for long-term Treasuries and 79% for high-grade corporate bonds. Commodities gained 66% for the decade, and even beaten-down real estate is up 62%. Cash in the form of Treasury bills put in a 38% return. Only the S&P 500 lost ground, falling 26% since 1999.

That's a pretty sobering set of results. Let's dive into them in more detail, with my opinions on their outlook for the future.

1. Gold. While I have my concerns about gold in the next three to six months, I remain bullish for the next five years. I don't expect the current Fed policies to produce inflation in 2009, maybe not even 2010, which is likely to cause Ben Bernanke to do more of the same to ultimately be successful. My short-term concern is a little contrarian -- simply put, too many people are too bullish on gold bullion right now.

This is similar to the way people were excited about gold bullion near $1,000 in February … before it expeditiously fell to $850. If you're willing to endure a correction of that magnitude, consider broad exposure through exchange-traded funds like Market Vectors Gold Miners ETF and SPDR Gold Shares (NYSE:GLD).

2. Long-term Treasuries. Bonds have been in a long-term bull market since 1981, and I am quite certain that such appreciation cannot continue for another 20 years given the present monetary policy. But as Japan's experience shows, qualitative easing can take a long time to produce results.

The present yield on a Japanese 10-year government bond (JGB) is 1.3%, while the 10-year Treasury yield is 3.4%. Keep in mind that when JGB yields fell sharply in the mid-1990s to around 3.3%, no one predicted that their yields would eventually drop below 1%. While I don't see the same happening in the U.S., if this inventory rebound in the economy is not met by final demand from consumers, Treasuries could still appreciate substantially from present levels.

3. High-grade corporate bonds. High-quality corporate bonds remain a good value in the present environment. Even junk bonds have rallied a lot of late. Recently, Warren Buffett has bought a lot of corporate bonds, and investors will be well-served to consider following suit.

4. Commodities. The same way investors make the mistake to lump emerging markets together, they often think of different commodities as falling under the same general asset class umbrella.

That's a mistake. Natural gas acts much differently from oil, and silver can move in separate ways from gold. Over the long term, I believe that demand for oil will catch up with supply, despite the fact that in a weak economic environment, oil can decline quite a bit, as we saw in 2008.

It is difficult to hold leveraged mining stocks long-term -- the price action in stocks like Teck Resources (NYSE:TCK) and Rio Tinto (NYSE:RTP) during 2008 and 2009 is a good example -- but diversified commodity companies with strong balance sheets make sense in the present environment.

Among miners, BHP Billiton (NYSE:BHP) is the largest and best-diversified miner and carries very little debt. In energy, ConocoPhillips (NYSE:COP) has seen its shares lose a lot of ground due to its large exposure to the natural gas market, but is nonetheless a well-run energy company. Warren Buffett often says that you should buy the stocks of good companies when they are down; he did that with Wells Fargo (NYSE:WFC) this spring. I think you can do the same with Conoco.

5. Real estate. While it is possible to invest in commercial real estate through REITs, the danger involved on the commercial side makes me recommend avoiding that strategy right now. But if residential housing is close to a bottom, homebuilders like Toll Brothers (NYSE:TOL) are favorably positioned for the future. Residential real estate turned down several years before commercial real estate and it is likely to come out of the slump first.

6. Three-month T-bills. T-bills have exceptionally low yields at present, so they are not much of an investment, but rather a place to park your cash over short periods of time and roll it over.

7. S&P 500. Under normal conditions, stocks have tended to outperform bonds over longer periods. But the present times are anything but normal.

The S&P's trailing-10-year annualized return is slightly negative. We have had other examples in history where stocks have been flat for longer periods of time, so this is not surprising. Yet, as the deleveraging process continues at the consumer level -- at the government level it has not yet started -- the economic environment will be choppy, and we may get more of the same roller-coaster ride from the S&P 500.

To recap
I'm not saying that buy-and-hold stock investing is dead. But as I see it, you have to buy and hold stocks in the best sectors. I see the secular bull trends in natural resources continuing, though not in a straight line upward. I also see emerging markets, especially India and Brazil, outperforming developed markets, while the developed world struggles to repair its banking system. I'll be investing accordingly.

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