Investing for beginners | 5 investment charts - YouTube

in this video I'm gonna be talking about investing for beginners I'm gonna focus

on five charts that are gonna give you some perspective on investing for the

long haul and even if you're a veteran investor

these charts are really interesting gonna give you some insight as all the

volatility we've experienced in 2018 in 2019 and kind of what we can expect

moving forward or expecting a lot of volatility moving forward

these charts kind of sum it up for you but before we do that if this is your

first time at our channel or you haven't subscribed to click on the subscribe

button at the bottom my name is Travis Sickle CERTIFIED FINANCIAL PLANNER with Sickle Hunter Financial Advisors

So some of these charts are gonna look a

little complicated don't get overwhelmed they're really interesting long term

perspectives on all these charts and it's just going to make you a better

investor so let me pull up on the screen this information so we can look at it

together so the first chart that we're gonna look at is the entry or declines

or as calendar year returns even that title sounds a little complicated it's

really just looking at the course of the year or each every single year of the

stock market and what is like the worst time period in that particular year

versus how the market finished for that year so think of the recent volatility

that we've experienced where there's a massive decline in one day or a week or

a month that is what we're looking at versus if you just stayed the course for

the entire year so I'm gonna pull it up on the screen let's take a look at this

so the bottom half the orange half is the entry R declines so I'm gonna zoom

in let's just look at some of these numbers look at 2008 so you saw that it

goes down to negative 49 percent but 2008 also finished negative 38 percent

yes that was a terrible year each one either one of those numbers I don't want

either one of them but what you can see here is at one point it got so bad that

the market was down by 49 percent and I guarantee there was people who literally

sold at that low of 49 percent negative 9% and that's what they experienced but

if they'd stayed the course it would have been negative 38% yes that's

probably a terrible depiction of staying the course by only coming back what 11

points from the worst but if you look at it over time some of these numbers are

just staggering for example let's take a look at the most recent in 2018 let's

just take the full year 2018 it wallet was still down over the the entire year

the sp500 negative 20% was the low and then you see the year finished at

negative 6% same thing for 2017 where it was down negative 3% but finished

positive 19% well did you saw in 2018 the end of 2018

you saw that immediate decline and then the market bounced back and you might

have forgot about it already since the market has been bouncing back little

volatility here there but that is the point of staying the course almost every

single year is like that it means just crazy where you have in 2000 2011 down

negative 19% and then it finished the year flat at 0% but if you had sold that

any of these lows is usually and it's not like it's one day the markets doing

great and then a split second later it's down 19% and the following day its back

to zero could you see the headlines you talk to your friends and everything is

just negative negative negative and then all of a sudden you you're making a

decision well but the world's come in two and the sky is falling and you're

turning to Chicken Little and then all of a sudden the market recovers before

you know it and that's long-term investing so as a lot emotional it's

it's a lot of emotional control that you need to have when you're looking at

investing for the long haul it's also a reason what you don't invest in the

stock market for a very short-term goal so this could be to your advantage

understanding that that even if the market is doing well you don't take your

money and then put it into the stock market hopefully that'll come up in a

week so you can go on vacation or something like that that's just crazy

it's way too short even one two three years way too short

to take the money and put it into the stock market thinking

that you're gonna make a quick dollar because you're probably not but you can

see each and every single year that there are low points and you just got to

get past that and figure out what you're trying to achieve and why you're doing

it so that's the first chart so any one of these points you can look at any one

of these points and you see this the horrific number or the worst number the

worst number of the year and then you see how it finished there they're two

different stories so take that with a grain of salt

so the intraday declines versus that the full calendar year again that's looking

at short-term returns versus longer-term now one year is clearly not a long term

might be a long term capital gains one year plus but it's definitely not

long-term investing so understand that it's very important this next chart is

cumulative returns it also looks a little complicated especially if you're

not used to looking at charts but I'm gonna break it down and you can see

those numbers right there at the bottom you see stocks gold 10-year Treasury

consumer price index home prices cash and oil so you can see all these

different returns and the stock market since 2007 has looks like a beat them

all to beat every other category including gold which I find really

interesting because when I was doing the research for this particular video gold

was searched how to invest in gold was searched twice as much as investing in

the stock market we're investing for beginners or any of the intelligent ways

to invest then just putting all of your money into gold because that is not

diversified at all gold 4.08 4.9% versus the stock market seven point eight

percent so I find it I find it interesting with these numbers the

differences in the stocks versus gold versus the ten-year Treasury when people

get scared they have a they have a habit of going to gold where you can see right

here it's 4.9 versus 7.8 you have to ask yourself what are you investing for why

are you investing what is it what is the money going to be used for so clearly

the the winner here even since 2007 is still stocks it's not real estate it's

not gold and of course it's none of the other category definitions

I mean I guess it's a little shocking to me oil was down 2.6% over this timeframe

so this is cumulative returns giving you a little bit more perspective on

investing in the stock market and you probably wouldn't feel like that if you

turned on CNBC or any of the other news channels and just listen to them talk

about the stock market you would think it's just good is going to the casino

but here it's clearly not if you do it over the long haul again you have to

match your investing strategy with the goal that you're working towards this

next chart is almost dangerous to put even put up on the screen the

probability of positive returns over a ten-year time frame you had a 97% chance

of having a positive return and obviously this is going to decrease the

shorter that you are in the market and this is the S&P 500 or this is where the

information is coming from so in one day you have a 53% chance now 53% is in your

favor does it mean you should go out and and play those odds but it's giving you

some perspective on each one of these so one day is 53 percent one month 63

percent the 10 years I mean 97% chance of having a positive return or doing

better with your money than just you know keep it in cash this next chart is

a little difficult because a case for growth investing when rates rise so

they're comparing and diversified or a dividend paying stock portfolio Growth

Portfolio and then you see that first column that's that is the bonds so in a

rising rate environment it's not really a surprise that bonds don't out you know

don't perform very well relative to stocks so on the left on the left side

the blue is the average annual total return when interest rates rise and on

the right side the oranges average annual total return all other periods so

when rates rise bonds are not going to do as well I mean that's not much of a

shocker but here's here's what you really need to pay attention to when

you're looking at bonds bonds and bond funds two completely separate things

bond funds hold bonds yes so they are investing in bonds but they're going to

react much differently if you hold a bond to maturity then all

have to deal with is default risk you have market risk if you're in a bond

fund and I know that's probably a topic for another video altogether to

understand what that means what I just said

but it works a lot differently so when you're hearing about bonds you have to

understand that they just work differently than bond funds bond funds

you're gonna see that volatility meaning the prices are gonna change when

interest rates change so for interest rates rise those bond prices are going

to fall think about it this way when you're investing and you're going out

and you're trying to be conservative bond funds make it very difficult

because as interest rates rise that bond fund price has a good chance of falling

because as the new issues come out they're gonna be more attractive than

the existing ones because they're getting a better interest rate so this

chart is kind of interesting because the bonds versus stocks as rates rise bond

prices are not going to do as well in general so if you were looking at this

chart and you're looking at the curt interest rate environment it's been low

for a long time so as interest rates at some point you have to figure that

interest rates are going to rise and this could possibly be the result so

it's important to look for long term investing and make sure that you're

looking at your risk tolerance and that's what you should focus on when

you're looking at this chart should you be more or less conservative for a

particular goal how is that going to play out over the long haul that's what

you have to pay attention to okay chart number 5 by far my favorite of all

the charts because it's going through just terrible times and what was the

aftermath what happened after that so if you didn't know 1987 single-day dropped

according to this chart negative twenty point four seven percent that was a

terrible day but the year finished positive actually pretty good so one

year later so that year actually finished positive but one year later it

was at 23% so imagine that facing a 20% loss in a single day how would you

handle that now I would tell you in this sense

if negative 20% what would you do go write it down go write down what you

would do if you lost 20% in one day in the stock market because this is the

result after one year three years five years ten years up fifteen point four

three percent look at 2008 same thing one day return

down almost 9% one year later up 35% going out to ten

years twelve point nine six percent so you jump down to the averages right here

and they just took terrible timeframes or terrible one-day returns and look ten

years with that one day one year three years five years ten years out and you

can see that it it played out in every situation I think it played out in your

favor you were up in every single scenario maybe not as much as you wanted

to be but you were still positive so when you're investing you have to look

what you're trying to achieve go back to it go back to that financial plan what

your objective is write it down write down the goal especially if you have

trouble staying the course when you're investing you might know how much you

need to save you might know how to diversify you might have everything set

up but then it comes out one one instance that one moment when the

markets down and that's what this is highlighting that's why I like this part

so much is because it's one day that just gets pounded and then they stay the

course and it works out that's what it is that's what history is showing us in

this chart so you can take it or leave it but that is a lot of data those are a

lot of points and that's a lot of aftermath to have positive returns after

that time frame especially in this short time in the short period the one year I

mean we it's not even saying oh we're down right now we have to wait ten years

for the recovery even after one year and all of these instances in all of them

except let's say and all of them except one - was the market negative and every

single other one was positive but then even if we carried it out - three years

three years had all positive returns five years had all positive returns ten

years had all positive returns so it looks like it's in our favor of

course it's not a indicator of future performance and you might want to

believe that history is gonna be completely different every single time

and that's usually what the headlines say and then someone comes out and says

no you're actually wrong it's exactly the same just a little tweak error there

things change but the game stays the same you know markets rise and markets

fall but when you were looking at this data it's clear as day that long-term

investing has a very good chance of ending in your favor of course if your

your time horizon stops in something like a 2008 that makes it difficult but

the recovery on that was still there you could still see that there's positive

returns so if you're invested correctly for that time period when you need those

dollars then historically speaking you're gonna be ok that's that's what

the numbers are showing us here I hope this has helped if you're investing for

the long haul if you're an investment beginner trying to figure out how to

invest your dollars look at this information there's plenty of other

information but understand that investing is for the long haul and not

the short term so you want to make sure that you're properly diversified make

sure you have the right positions of course of course when you're looking at

this information you have to understand that in historical numbers or the

information that we've looked at today is not an indicator of future

performance but that's a lot of information to look at and digest to

understand long-term investing again you have to look at your positions what your

goal is where the markets at there's a lot of factors involved so it does get

complicated but if you continuously learn and continuously take this

information in and you can help apply it so you make sure that you understand why

you're invested and what you're trying to achieve if you've enjoyed this video

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