6 graphics that will teach you how to have an investor’s mindset

Yes, investing comes with risk, but products like Market Savings and Market Trust allow you to be in investor in a different way.

Around 158 million Americans, or 61% of US adults, own stocks. At Save, we want to increase the number of people who understand, and benefit from, the wealth generation potential of financial markets.

Nearly half (45%) of American adults feel they’ve missed out on financial opportunities by not investing more or at all over the last 10 years, according to a 2022 MagnifyMoney survey of 1,500 U.S. resident adults.

Yes, investing comes with risk, but products like Market Savings and Market Trust allow you to invest without the risk of losing your initial deposit.

For Market Savings, your deposit is FDIC-insured3 up to the maximum allowed by law, which is $250,000. This insurance keeps your initial deposit safe so it will always be returned to you, no matter what happens. At the same time, Save invests on your behalf (with money separate from your deposit amount) to generate the variable APY* you’d receive on your deposit. Currently, a 1-year Market Savings term has a variable APY* of 9.84%.

For Market Trust, your principal is guaranteed if held for the complete 5-year term. When a program is started, the majority of the deposit is placed in a guaranteed interest product (such that, at maturity, its value will equal your initial deposit)4 while Save also invests on your behalf to generate market returns – the variable APY** for Market Trust is 16.53%.

For both programs, your principal is guaranteed regardless of the performance of your investment portfolio, and at least your initial deposit will be returned at maturity.

These 6 graphics will help drive home the benefits of investing – specifically, why it’s so important to be invested in the markets over the long term, even when cash feels like a safer bet.

All credit to author and speaker Brian Feroldi who included these, among others, in a recent LinkedIn roundup.

Investor tip 1: On average, stocks beat all other mainstream assets

Let’s say you put $10,000 into a standard savings account earning the average APY each year since 1980. You never touch it and you “let it grow”. While you do earn interest on your $10,000, you’re not always earning enough to beat inflation. Meaning that the value of that cash is just slightly above static when compared to inflation in the present, even if the dollar amount in your traditional savings account looks like it’s growing.

To actually have your money grow, you need to do something with it.

But investing comes with risk, right? Yes, but there are products that invest for you while keeping your initial deposit safe. Save’s Market Savings and Market Trust are two examples – both keep your deposit safe while enabling you to benefit from market-driven returns.

In other words, Save exists so that your hard-earned cash can grow over time, while being protected from market volatility, rather than being eaten up by inflation (as is the case if your cash is sitting in a traditional savings account for the long term).

Investor tip 2: Stay invested or miss out

So we’ve covered the importance of doing something with your money beyond sitting in cash.

Markets can be volatile, but this graphic demonstrates the importance of staying invested; let this sink in:

Take this Fidelity hypothetical from a $10,000 investment made on January 1, 1980, that’s been invested to December 2022: Missing just 5 of the best days in the market could make you miss out on $411,258 in returns and that sum only increases with more of these best days you miss. If you miss 50 of the best days, you could have missed out on almost all of the gains.

Missing the best periods can kill your long-term returns. Be wary of the nay-sayers – there are always people calling for downturns, so don’t try to time them.

Investor tip 3: S&P 500 – historically a wealth creation machine

Legend has it that Albert Einstein once said, “Compound interest is the eighth wonder of the world,” while Warren Buffet has described compound interest as “an investor’s best friend.”

The S&P 500 consists of 500 of the largest U.S.-based companies. This group of companies is roughly 80% of the total U.S. stock market capitalization, and it’s considered the best indicator of the overall performance of U.S. large-cap stocks.

The current S&P 500 was launched in 1957 and since then the average annualized return is around 10%. Even when adjusting for inflation, this annualized return comes out to be over 6% (this is known as “real return”, i.e. return above inflation); in comparison, the real return of cash is roughly zero over the same period.

Let’s take $100 invested in 1957 when the S&P 500 first launched with 500 companies. That $100 would have a $58,400 value in 2022.

This is due to the power of compounding.

Investor tip 4: The stock market moves faster than the economy

The stock market is known as a leading indicator of the economy – rather than the other way around. While this is not a hard rule, one implication is that there’s not much point trying to time the stock market using measures like recent (i.e. historical, realized) economic growth, because on average the stock market has already moved beforehand.

The reasons ‘why’ the stock market (take the S&P 500 in the United States) could be a leading economic indicator can be saved for another article, but a couple of examples are:  

  1. Stock prices reflect expectations of company performance or profitability, which in aggregate form a picture of expectations for the state of the economy;
  2. The “wealth effect”, whereby if the stock market rises, the wealth of consumers increases, with a subsequent positive impact on consumer spending and hence economic growth.

Ultimately, instead of timing the market, the wisest thing you can do as an investor is to start early and stay invested as long as possible, to capitalize on the growth potential of the stock market.

Investor tip 5: More upside than downside

Fact: The market is volatile.

This means there are going to be highs and lows in your investing journey.

Here’s the silver lining: as long as you ride out the (sometimes significant) bumps, the stock market generates inflation-beating returns over time.

The bull markets, on average, are larger and last for longer than the bear markets – as demonstrated by the shaded sections in the graph – you just need to ride out some bumps and stay invested.

Investor tip 6: Bonds have a time and a place

Bonds have a time and place but aren’t intended for long-term, real (i.e. inflation-beating) wealth generation on a standalone basis.

People have used the “100- age” rule to determine the percentage of your portfolio that should be invested in stocks (“if you’re 30, then put 70% in stocks”), with the remainder in bonds. While this might have been relatively more sensible in recent years, it is less applicable going forward as the relationship between bonds and equities (specifically, their correlation) is not stable.

Investors should have a clear purpose for holding bonds going forward, that doesn’t rely purely on diversification benefits, such as buying a 5% yielding government bond, AND holding it to maturity; you’ll get your 5% p.a. and your capital back.

Put another way, the diversification benefit of bonds (negative correlation versus equities) was great for the last 20 years (perhaps most memorably in 2008) but it’s unclear how that relationship will evolve. Recently the correlation has been positive, which can be typical behavior in higher inflationary environments. Bonds may well be on course for their worst streak of calendar year returns ever – US government bonds have never had 3 consecutive negative calendar years over the last 100 years of history. Whether outperformance follows, we shall see.


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