A picture tells a thousand words, they reckon.
I think they’re right.
It can also answer a thousand questions.
Questions like:
– Isn’t investing risky?
– Isn’t investing volatile?
– What about the current market environment?
– What if [X] happens?
And, the big one, which is sometimes asked, but too often not asked at all:
– Why should I invest?
The picture, of course, is the fabled Vanguard Index Chart.
And the most recent one was released today.
Happy Vanguard Index Chart Day, to all who celebrate.
(And that should be all of us.)
Yes, I wrote about it last year.
And the year before.
In fact, it’s probably the one specific thing I’ve written about most, over the last dozen years I’ve been at The Motley Fool.
(Okay, maybe second, behind Warren Buffett… but coming second to Uncle Warren is not exactly an embarrassment!)
I’ve written how important it is for those who want to understand the astonishing opportunity that comes from long-term investment.
What opportunity?
Well, the chart tells us that a hypothetical $10,000 invested in Australian shares in 1993 would have been worth $138,000 after 30 years. That’s 9.2% per year.
And that $10,000 invested in US shares would have become $176,000.
It shows us that such a result was possible despite the dot.com crash, the GFC, and the COVID crash.
It shows us that, even with recently higher inflation, shares have returned an astonishingly great result.
It shows us that over the past 30 years, ignoring volatility and doubt, and investing anyway, was astoundingly successful.
It also shows the power of investing in low-cost, broadly diversified index funds.
And it shows the value of, well, leaving your investments bloody well alone!
(That’s not how Vanguard phrases it… that’s all me. But I think it nails the reality quite nicely.)
Bottom line: If you hate money, don’t invest for the long term.
But if you kinda like money, and are prepared to invest for the long term, I hope I’ve got your attention.
I can’t make you promises about the future.
But what I can tell you is that the last 30 years of data is compelling.
So have each of the annual 30-year charts for as long as I’ve been doing this.
But also, so was the century before that, by the way.
How much do I believe in this?
I have a copy hanging in our house, next to my young bloke’s desk. (My wife put it there, by the way, not me. That’s a win in itself!)
My nephews have a copy blu-tacked above their stairwell (that was my idea).
And I was given the green light to starting an investing service, called (unimaginatively) Motley Fool ETF Investor, to help our members build a portfolio of ETFs!
Yes, I’m still a stock-picker. Yes, I still want to beat the market by doing so.
But I also own ETFs, for breadth and long-term compounding.
Including for my young bloke.
I truly believe this is the single most important picture in investing.
And I think if you really grasp the importance of this chart – (hint: it’s the awesome power of compounding) – it can truly change your financial life.
Oh, and seriously, print it out and whack it next to your computer as a reminder each time you get nervous about market volatility!
Fool on!
