Seeing Is Believing: Charts That Show Why Long-Term Investing Wins

Seeing Is Believing: Charts That Show Why Long-Term Investing Wins – (0:00)

Alex Call: Hello everybody, welcome to the webinar today. I’m going to give it a few more minutes, maybe just a minute or two while everybody is kind of trickling in to the webinar. I hope everything is going well, you’re enjoying the spring weather. I know we are. Last week it was 70s and beautiful, and now it’s rainy and typical April weather, which we’re always excited about. I see that there’s still a few more people trickling in, but I’ll go ahead and get started, just kind of go over a couple things, a little housekeeping. And then anybody who comes in a minute or two will make it for the presentation.

Good afternoon and welcome, I am really excited to present this webinar today, especially on this topic: ‘Seeing Is Believing: Charts That Show Why Long-Term Investing Wins.’ And before we jump into that, just a couple of housekeeping items.

For any questions you may have, Jeff Sevy, another advisor at this firm, will be responding to your questions for you the best that he can. And if at the end of the webinar there are questions that are still standing, I will answer them at the end. But just know that if you have more individualized questions, if you are a client, please reach out to your advisor.  I know that your advisor would love to talk to you over the phone and set up a time to meet.

And if you are not a client, what we will actually have is a link in the chat where you can click on that link and schedule a consultation. And we would love to be able to answer those questions that you may have.

Lastly, before we get started, there will be a survey sent out at the end. We love all and any feedback that we can get, always trying to find ways that I can improve as a presenter. And more importantly for you, ways that we can know what you want to hear about. So please fill out that survey so we can give you the information that you want.

With that, a quick disclaimer, we always have to have one of these. Just note that the information provided in this webinar does not, and is not intended to constitute investment or legal advice. Instead, all information, content, and materials available are for general information purposes only. So with that being said, lets jump right in.

Why Long-Term Investing Wins – (3:27)

So the ultimate goal of this webinar is really to help show you through charts why long-term investing wins. And the reason I’m excited about this is charts have helped give me a better understanding. They say a pictures worth a thousand words, I feel the same way about these charts. So it will  be fun. Some of them will be more self-explanatory then others, but we will be able to geek out a little bit as we go through these.

Why I wanted to give this presentation today, or at this time, is there’s a lot of uncertainty in the markets and the economy right now. So as I’ve been meeting with clients, it’s almost a guarantee that the first thing they want to talk about is what’s going on in Washington with the tariffs and the economy. What’s going to happen there? Are we invested the right way?

So we’re not going to get into details of the tariffs and Washington right now or today, but I do want to talk about what our mindset needs to be as long-term investors. And not just during this time, but during any time of uncertainty or crisis.

To do that, I want to share a story with you that illustrates this. This is a story of Admiral James Stockdale. Admiral Stockdale was the highest ranking US Military Officer during the Vietnam war that was held as a prison of war in the infamous Hanoi Hilton camp. He was there for over 7 years. During this time, he was brutally tortured over 20 times. He had no rights under the Geneva convention, and he endured unimaginable conditions.

What’s remarkable though, is that not only did Stockdale survive physically, but he really was an example of  remaining mentally resilient. He led resistant efforts among fellow prisoners of war. He established a covert communication system, and he even set up rules with other POWs to help reduce collaboration with their captors.

Years later in an interview, he was asked, “How did you survive? How were you able to do this?” And Stockdale replied, “I never lost faith in the end of the story. I never doubted that not only would I get out, but also that I would prevail in the end and turn this experience into the defining event of my life. Which in retrospect, I would not trade.”

And then the interviewer asked him, “Who didn’t make it out?” To the interviewer’s surprise, Stockdale answered, “Oh that’s easy. It was the optimists.” Stockdale went on to explain that the optimists were the ones who said we’re going to be out by Christmas. And the Christmas would come and go. And then they said we’re going to be out by Easter. Easter would come and go. And then Thanksgiving and so on and so forth. Until eventually, they lost hope and died of a broken heart.

This lead to what was known as the Stockdale Paradox. Which is “You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.” I feel that this is the mindset that we need to have when it comes to investing. That like Admiral Stockdale, successful investors survive not by blind optimism, but by combining unwavering belief in the future with discipline to confront the hard, brutal facts. Especially while investing during hard times of uncertainty. And so yes, we are confident in the future. But we are not naïve about the problems that we are facing now. And so that’s how I want to frame this, why we believe long-term investing works and wins.

The first thing we need to do is confront the facts. I feel there are three brutal facts when it comes to investing. The first, there is always going to be a crisis. There’s always something happening. Next, that leads to volatility. The market goes up and down and there’s these big swings along the way. And lastly, we don’t know when these are going to happen. It is complete randomness and is it rare to know when those ups and downs will happen.

Lets look at the crisis’. So if you look at the last 100 years what America has gone through, we can see World War I, the Spanish Flu, the Great Depression, World War II, the Cold War, the Korean War, the Vietnam War, the Cuban Missile Crisis, the assassination of JFK, the assassination of Martin Luther King, inflation in the 70’s, the dot.com bubble in the 2000’s, 9/11, the Great Recession, COVID, and if your thinking now a potential trade war with China.

And these are just the first 15 or so that I could think of. I’m sure that each of you could think of many more crisis’ that you have seen and experienced during your life. The thing is, this will not change. There will always be a new crisis. We don’t know what it will be or when it will happen. And so if your waiting for the world to feel safe to invest, you’ll probably wait forever.  There will never be a perfect time. Because there’s always going to be a crisis, there will always be declines. Its important to know that these declines are not bugs in the system, but a feature.

This leads to this volatility component. And so when we look at volatility, let me pull up a laser pen to explain what this chart is. So this is volatility in the S&P 500 from 1942-2025. The type of decline is how much it has gone down. The average frequency is how often we expect this to happen. And then the average length is how long it stays down. And then the last occurrence was just the last time that it happened. This does not include April, and so that’s why it says March 2025.

But if you look here, the market goes down 5% or more about three times a year. Then if we look at 10% or more, about every 16 months, and it lasts a few months. The market goes down 15% or more about once every three years, and it lasts just over half a year. And then the market goes down 20% or more about once every five to five and a half years, and that lasts for just over a year. The last time happening just a couple of years ago in October 2022.

We can see that there’s this volatility that happens in the market. And again, this is a feature. This is going to be the case. It’s a brutal fact that we’re going to have to confront.

So what does that mean for retirees? Well… over a 30-year retirement, what is this going to look like? Well, that means that during this time, over 30 years, you’re going to see over 20 declines of 10% or more in your portfolio. And you’re going to see declines of over 15% ten times. And over 20% at least five times. So we need to expect volatility, that is just what’s going to happen.

And some of you might be thinking, “Well, when the crisis happens, we’ll get out of the market.” Or, “We know when this is going to happen. We know when that volatility is going to come and when it’s going to go down.”

Well, that leads to this next chart, which just talks about the randomness of the returns in the market. And so this is going from 1928 to 2024—so just under 100 years. And what you can see here is that on the left, this is the S&P 500. The S&P 500—this is just the U.S. stock market. When people are saying “the stock market,” this is generally what they are referring to. The largest 500 companies in America. And so when we look here, the annual return is here on the left going from +50% to -50%. And then on the bottom are the years that it happens.

And you can see there’s really no rhyme or reason as to when it goes up or when it goes down. One person coined it as a “random walk down Wall Street.” It’s just going to go—the market’s going to do what the market’s going to do. And we don’t know when that’s going to happen.

This next chart that’s going to talk about that volatility and when it happens is that the market drops every single year. But this chart is going to show how often the year still ends in positive territory. Volatility does not destroy long-term growth. Again, it’s part of it.

And so I’m going to take a moment just to explain this to you. This is the intra-year decline. That means how much did the market drop during the year versus what did the market return by the end of the year?

And so, for example, I want to look at a couple of these. So the yellow is going to be how much the market dropped during that year. At any given time during the year. So I’m going to pick on 1987. This is because this is a year that many of you have lived through and maybe remember—Black Monday. The largest drop in the market on a given day. You can see that during that year, the market dropped 34% throughout the year. But by the end of the year, the actual return for 1987 was a 2% gain.

But then there are going to be some years—so if we look at 2008—where that’s not the case. Where it dropped 49% throughout the year during that Great Financial Crisis. But it ended at -38%. And so you can see that right here. But I love following that with the next year of ’09. You can see that the market dropped 28% throughout the year, but it ended the year up 23%.

And so, on average, the market will fall 14% at any given time throughout the year. But you can see that just because the market falls throughout the year does not mean that the year is going to end negative. More often than not, you will have a positive return by the end of the year.

So if you’re able to stomach these declines, history shows that you’re going to be rewarded. And let’s look and see how that plays out over time as we now look at having an unwavering belief in the future.

It’s important to say that we have an unwavering belief in the future if you are able to do these three things. These things are: thinking long-term, staying in the market, and then also ignoring the noise. As we’re able to do these, you will see that long-term success. And this is where I have that unwavering belief in the future. So I want to look at these each individually.

Think Long-Term – (16:22)

When we think long term, it’s not about what happened today or this week. It’s about what happens over a decades-long period—10, 20, 30 years. So I want to start with a little example. My favorite tennis player is Roger Federer. He is arguably the greatest tennis player of all time.

He was giving a commencement speech at a university, he talked about how his success happened. During his time as a tennis player he won 54% of his points, meaning that he lost almost as many points as he won. But then if we look at how many sets he won, he won about 65% of his sets. And he won right around 80% of his matches. The key takeaway is that you can become—well, with Federer, he became arguably the greatest tennis player of all time—by winning just over 54% of his points.

So, how does that relate to investing? That as we endure these constant setbacks, we can have success.

Let’s look at that here on this chart. This chart is showing how often the S&P 500 was higher over various holding periods. Meaning, on the left, it shows the odds the S&P 500 was higher at any given time. The holding period is down here on the bottom, starting in one day and going through a 20-year period.

So let’s look. For one day, the market’s going to be up 51% of the time. Meaning the market will be down 49% of the time. So it’s almost 50/50. But if you hold your investment for a week, it’s going to be up 57% of the time. And if you hold the investment for a month, 62%. Three months, 66%. And then 70% at six months. Year over year, you’re going to be up about 75% of the time.

If you hold it for five years—83%. Ten years—93%. And over a 20-year period, there has never been a 20-year period where the market has been down. It’s always been up if you’re able to hold it for that long. And so, we must endure these constant setbacks in order to get that long-term return. This is just looking at whether it was higher or lower.

But if we look on the next chart—now if we zoom out—we can see what the best and worst returns were over any given timeframe. And so that’s what this is going to show. The best and worst returns starting in 1926 through 2024.

So in any given year—the worst one-year return was -43%, where the best year was 52%. And I want you to notice the trend as we take this and we go further and further out.

So if we look over a three-year period, you can see -27%, up 35%. Those two—they’re getting closer and closer the longer out we go. The best and the worst, over five years—you can see there.

Ten years, fifteen years—the worst fifteen-year period was 4.5%. Over a 20-year period… 25 years… and then over a 30-year period, the best return was just under 15%, while the worst was just under 8%.

And I find this—I just find this fascinating. I love this—just seeing, time is going to be your greatest ally. And so the longer out you go, the closer the best and the worst returns are.

Now I want to look at a different chart. This chart is just showing the distribution of the S&P 500 returns. What it shows here is that on the left, you can see the number of years the S&P 500 fell into these different buckets. And then on the bottom are the actual buckets that they are.

So you can see here on the left, it’s going to be that three times since 1928, the market was down 30% or worse. Three times the market was down 20% to 30%. Fourteen times it was down 10% to 20%, thirteen times 0% to 10%, and so forth.

A couple of things that I want to point out is that about 75% of the time you ended positive. And that you have a greater chance of getting an over 10% return in the market than a negative return in the market. And so again, you’re going to experience that volatility that’s there. That’s a feature of the system.

But over the long term, as you stay invested, it will go up. Because more often than not you will be getting those positive returns. And more than likely, over 10% returns in the market.

Stay In The Market – (22:26)

So now that we talked about the importance of thinking long-term, I now want to go to the importance of staying in the market. A lot of people think, “You know what? I get it. There’s volatility. There’s crises that happen. But when the market is free-falling I’m just going to take my money out and let it settle, and just relax, and let the market settle. And then I’ll jump back in once it’s at its bottom—or once that has happened.”

Well, this chart shows—I’ll show you the chart and then we’ll walk through it. This chart is going to show, since 2004, what the top 50 days in the market were and the bottom 50 days. So everything in green is going to be up here—these are the top 50 days in the market since 2004. And in the red are the worst 50 days in the market since 2004.

What you can see is that they are just all clumped together. Volatility begets volatility. The market’s going down—you’re likely to have these big up days during that time period. And then it might be another down day. And so it’s just really very, very volatile and all over. You can see the most being right here—this was the Great Recession. And then right here—this was COVID. Where it’s just bouncing all over the place. And every day could be these huge swings.

Knowing that, I like looking at this chart, which shows what was the growth invested—if you invested $10,000 into the S&P 500 in 1980, how much would you have by 2024? Well, this is going to show what that dollar amount was here on the left. And on the bottom it’s going to show if you were invested every day. If you never took the money out, you would have $1.6 million, if you invested $10,000.

But what would have happened if you missed the five best days? So again, the chance of this happening, it’s not a realistic scenario. But I think it’s important to illustrate the importance—just how missing five days, what that can do.

And to put it into perspective during this timeframe, there were over 11,000 days that the market was open that you could have invested. And if you missed just five, the five best, about $1.6 million would have turned to $1 million.

Now, what happens if you missed the 10 best days? Out of those 11,250, if you missed the 10 best, that would have turned to $730,000. If you missed the 30 best, $260,000. And if you missed the best 50 days, you’d have gotten a fraction of what you would have had, had you stayed invested the entire time.

And so just the importance of, you have to stay in the market. I know it is difficult. It is hard. But we have to have that unwavering confidence and belief in the future that the market is going to rebound. And that even though we do realize some of these bad days, over the long-term it will be up.

Ignore The Noise – (26:07)

Now, the last section I want to go to is ignoring the noise. And so, no matter when, it doesn’t matter when, there will always be noise, whether it’s from family, friends, media. It’s going to be something.

Lately, the loudest noise that I hear is all about politics. It’s all about, and I feel like that can be the case for many things. Many things are politicized these days. Investing and the economy is no exception. And so I just want to take a quick moment to speak to this and the importance of ignoring this noise.

This next chart, this is going to show consumer confidence in the economy by political affiliation. It’s important to note that we have clients all over the country. Clients who lean left, who lean right, who are very left, who are very right, and everything in between. But I want to look at this chart right here.

What this is going to show is how confident people are in the economy at any given time. The red line is for Republicans. The blue line is for Democrats. And remember, these people are living in the exact same economy. These are all people in America. And then these dotted lines right here, this is when the president changed from a Republican to a Democrat or a Democrat to a Republican president. What that election day was. And it’s not hard to find the trend.

As soon as election day happens,  when Obama goes into office, Democrats go up. You can see Republicans are going down. As soon as Trump goes into office right there, election day, boom. Republican confidence shoots up. Democratic confidence goes down. Biden goes into office, same thing. It just switches. And the same thing as Trump has taken office for the second time.

Maybe I like this chart so much because it rings so true. As I’m working with my clients, when people come in I can usually tell within five minutes who they voted for. Depending on how their reaction is to the economy. Whether that’s like, right now, with Trump in office, these tariffs are a negotiating tactic, and we’re in a good spot. We know who they voted for.

Or what’s going to happen to the country? This is the worst thing that’s ever happened. And then I can usually tell who they voted for. And that’s not just when Trump was in office. That was the same thing when Biden was in office. The economy was doing well. People who leaned more Republican thought the economy was doing very bad. People who were more Democrat thought the economy was doing very well. We were living in the same economy, it’s just the lens that we see it through. And so I find this chart fascinating.

Mainly, though, the reason why I find it fascinating is because of this next chart.

And that is if you look at the growth of a $1,000 investment in the S&P 500 from 1933 to 2024. What we can see here is that this chart is showing where that growth comes from. The blue is during a Democratic presidency; the red, a Republican presidency.

And it’s because it doesn’t matter who’s in office. The economy is going to go, you can see it up and to the right. We’re going to continue, the market will continue to go up.

I think Warren Buffett says it best: “If you mix politics with your investment decisions, you’re making a big mistake.”

Keep investing and politics separate. Ignore the noise.

And so now as we’re ending, I want to put all of this together. What I want to do here, this is going to be one of my favorite charts that really looks at it from a long-term perspective. What we can see here, and I’ll just take a moment to explain this. This is going to be a bull market. A bull market meaning the market is up and has been up over 20%, versus a bear market when the market drops over 20%. And so this is since World War II.

The blue are the ups. And so we have these big times when the market is going up. And then the yellows are the different bear markets that we have experienced. Every bear market is going to have its own story. It’s going to have its own crisis.

If you look here just since 2000, this right here was the dot-com bubble. Then the market went up, and then you had 9/11. The market went up, then you had the Great Financial Recession. Then the market went up. For COVID, a quick one, more going up. And then we had one here as they were raising interest rates. So every bear market has its own crisis.

And some of you may be saying, “This time, it’s different.” This recession, it’s not even a recession right now, but this crisis is different than the ones we’ve had in the past. And people have been saying that through every crisis. Every bear market has had people saying, “This time it’s different. It’s not going to recover.” Long-term investing is dead.

I have an unwavering confidence and belief in the future that that is not the case. That the market will recover and we’re going to continue to see progress. And so when you think, “What do I have that unwavering confidence in?”—it’s not who’s in Washington. It’s not that we’re not going to have any crisis. That we’re going to live in a world of rainbows and roses. No, I have confidence that the best companies the world has ever seen are going to continue to innovate and move forward. That entrepreneurs will continue to find solutions to problems. And ultimately, that we will continue to progress. That’s why I have that unwavering confidence.

And these charts back that up. As long as we can do those three things:

• Thinking long-term
• Staying in the market
• Ignoring the noise

And so, in conclusion, I just want to bring it back to that Stockdale Paradox. That being a successful investor is not about blind optimism. It’s about combining an unwavering belief in the future with the discipline to confront the facts, especially during hard times.

So I hope this helps give you some peace of mind as we’re going through this time of uncertainty, and not just this time, but anytime in the future.

Scott Peterson wrote a book called Plan On Living that walks through a lot of this. Not with these exact charts, but kind of that same philosophy, the importance of thinking and investing long-term, and being in the stock market. I know many of you probably have a copy of this book. If you don’t, please request one. We’d love to get it out to you. Or if you think that a friend or somebody could use a copy of this book or would benefit from the information that we shared today, we’d love it if you shared it with them. We’ll get you a link so you can do that. If you want, we can send a copy of the book to them, or we can send it to you and you can hand it to them.

Question and Answer Session – (34:45)

With that said, I just want to turn the time over to see if there are any questions.

It looks like a few of them, the Zoom recording will be made available to everybody. And yeah, what we can go ahead and do, we can put together just a PDF version of all these different charts and we can go ahead and send you a copy of those. That was the other question that I had.

Anything else, Jeff? Anything that you saw? No? Okay, sounds good. Well everybody, thank you very much for attending today. Again, if you have questions, you can go to that Calendly link in the chat or you can reach out to us directly. And please take that survey. Thanks.