My Favorite Investing Charts

Investing can be a daunting task for many, but with a bit of historical data and some basic strategies, you can increase your chances of success. In this article, I will be sharing some of my favorite charts that can help you understand the world of investing better.

The Cost of Admission
While the stock market can be a powerful way to grow your wealth over time, it’s important to remember that the price of admission to the stock market is volatility. Bear markets are an inevitable part of investing in the stock market.

This chart shows that you can’t have long term gains without declines along the way.

Bear Market Are Buying Opportunities
Bear markets can be painful because they are characterized by falling stock prices, increased volatility, and a general uncertainty in the stock market.

But these declines often create opportunities. Buying stocks when they are on sale has been a good strategy over the long run. Here are the returns for U.S stocks after declining 25% or more..

The Importance of Diversification
While bear markets can present buying opportunities for long-term investors, many investors may not have a long enough time horizon to weather the volatility.

By diversifying your portfolio across different asset classes, you can potentially reduce your overall portfolio risk and volatility. The goal is to own assets that will act independently of each other.

In this quilt chart you can see the best and worst performers change from year to year with very little predictability. The “asset allocation” portfolio is never the best or worst but tends to be near the middle.

Odds of Positive Returns
Last year was a stark reminder of the unpredictability of the stock market on a year-to-year basis. However, it’s important to keep in mind the bigger picture and focus on long-term trends.

Over the past century, US stocks have risen roughly three out of four years. As an investor, the longer you stay invested, the higher the probability of achieving positive returns.

Starting Early and Often
When it comes to investing, the adage “the best time to invest was yesterday, the next best time is today” holds true. The earlier you start saving, the better off you’ll be in the long run.

Bottom Line
Investing in the stock market can be intimidating, but these charts remind us why we invest. By starting early and being consistent over time, you have the potential to achieve financial freedom.  

Disclaimers / Sources:
US Stock Market Growth and Decline data from YCharts.
US stock returns following declines from @ChicagoAdvisor. Data from YCharts
Asset class returns by year from JP Morgan Guide to the Markets
Probability of positive returns from @ChicagoAdvisor and data from Bloomberg.
Account growth of $500 invested monthly from @ChicagoAdvisor

Stock investing includes risks, including fluctuating prices and loss or principal. This information is not intended to provide specific advice or recommendations about any stock nor is it intended to be a recommendation to buy, sell or hold any stock investment. We suggest speaking with your financial professional about your situation prior to investing.

Please consult your financial advisor regarding your specific situation. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy ensures success or protects against loss. This information is not intended to be a substitute for specific individualized tax advice. The Standard & Poor’s Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.