1. “Only 42% of stocks over their entire lifetimes provide a higher return than one-month Treasuries, and more than half provide negative lifetime returns”
Think about this, 1 of every 2 stocks has a negative return. Yet, most people think they can pick the winners from reading a couple blog posts or scanning through twitter.
It’s not that easy. This is why ETF’s can be so great for the vast majority of people.
2. “The 1,000 top performing stocks, less than 4% of the total, account for all of the wealth creation”
When you look at the S&P 500, the reason it truly has any real gains is because of a few great companies. They lift up all the dead weight of other ‘top’ companies. It would be great if we could all find and pick those few companies, right? We would be crazy rich if so. Sadly, it is not that easy at all. You are as likely to pick those winners by randomly throwing darts at a board.
3. “If you do not start saving until you are 45, you will have to save 3x as much per year than if you started at 25”
I harp on this one all the time. Starting earlier is such a game changer. Think about it, starting 20 years earlier allows you to save 1/3 as much per month. That is pretty wild. If at 25 you need to save $1,000 a month to retire, at 45 you will need to save $3,000 a month. That is a huge difference and the main reason why you should get started today.
4. ” The average investor, over a 20-year span ending in 2015, underperformed the S&P 500 by 6%. Over that period, the return was slightly less than inflation.”
This is wild to me. It shows how we are our own worst enemies when it comes to investing. The index that you can use with very little work, outperforms the average investor by 6% per year. These people are spending tons of time to try & beat something that most hedgefunds cannot do over a long period of time with the best traders, AI, etc. Don’t let your ego hurt you
5. “The greatest returns seem to be when most people expect the biggest losses. Wanna know the single best 3 year period of owning stocks? Turns out it was during the Great Depression. The next best returns, the three years starting in 2009, when the economy struggled horribly”
Be greedy when others are fearful, and fearful when other’s are greedy. 6-12 months ago people were taking out loans to by more stocks and crypto, but now are moving money to cash with losses… The winners buy when prices drop so they can accumulate more, not flea when others are scared. How do you ensure you can do this? You have an emergency fund, invest for long time horizons, and don’t become over leveraged.
6. “Between 1980 and 2018, there were 36 corrections. 2 happened in 2018!”
Most people see a correction and run out of fear. They feel like it’s the first time and only time this has ever happened, but this is not true. They are actually very common. Over the past 42 years there have been 38+ corrections, yet the market is still up an insane amount. This time may feel different since the issues that caused it are, but it really isn’t all the different. And know, there will be a next one.
7. “In 2007, Warren Buffett made a $1 mil bet with then Ted Seides, that the S&P 500 index could beat the average of 5 hedge-funds picked by Ted. The winner would donate the proceeds to a charity. Buffett shared that the compounded annual return of the S&P index fund was 7.1%. The five funds of funds returned 2.2% annually”
I could talk about these comparisons all the time. Diversified portfolios for the win! Don’t make it harder than it needs to be.
8. . “Had someone invested $10,000 in the S&P 500 on Jan. 1, 2002, they would have a balance of $61,685 if they stayed the course through Dec. 31, 2021. If instead, they missed the market’s 10 best days during that time, they would have $28,260.”
Most people think selling out of the market when it goes down is the right move, but what they don’t understand is that most of the best days come amidst this volatility. And by missing these top days, you significantly reduce the returns you get. Selling out rarely is the right move unless it’s in a company you think is done for.
I hope these stats help you better understand: -why you should stay invested
- How hard it is to pick the winners
- Why investing early is such a game changer
- Why we are our own worst enemies when it comes to investing
Disclaimer: none of this is advice, it is just for informational purposes. Talk with your financial planner before implementing any of these strategies.