Have I Got A Deal For You

Published on: 05/10/2022

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo take a look at an investment no one can turn down.

 

TRANSCRIPT

TONY:

I’m Tony Ogorek.  I’m joined by Portfolio Manager Jeff Viksjo.  Welcome to another edition of Chart Talk.  Jeff, today we’re gonna take a look at an investment, probably, nobody could really turn down.  If we look at the mid-1940’s and we just track it decade by decade, right to the present.  It looks like it’s moving up at a 45-degree angle, which is really attractive in terms of making money. However, there is a slightly dark side to this investment.  So, let’s take a look at our first chart here, what do you see here?

 

JEFF:

Yea and like you said Tony, we’re looking at the S&P 500 since 1945 on, and in hindsight it does looks like easy money, it looks like it goes straight up.  But Tony, we of course know that’s not the case.  There’s been some severe bear markets mixed in, including the Great Financial Crisis where stocks fell nearly 50%.  But as time as showed, the market always has recovered, as long as you don’t panic and sell at the bottom.

 

TONY:

And you know Jeff, you see these little red areas in the chart, they’re relatively small compared with the green areas, which obviously are up markets.  And one of the problems people face is, when they get in these down markets, they think it’s just gonna go to zero.  Invariably it doesn’t, but boy, it sure feels like that.

So, let’s look at our second chart, and this really expands on that a little bit more on an annual basis.

 

JEFF:

Yea, and this just shows you that volatility is a part of stock investing, even in good markets.  We’ve had a very strong bull market since the Great Financial Crisis ended. Nearly 13-years on, stocks are up about 400%.  But we still had an annual correction of about 10-15%.  Those are the red dots on the page.  The end of year returns have been mostly positive, 70% of the time we’ve had a positive return at the end of the year.  But that just makes us forget the correction we had to endure during the year.

 

TONY:

Yea, so I think the takeaway for our viewers is that, if you want the performance of the blue bars, you are going to have to endure the thrills of the red dots.  If you can do that and if you can put your red dot, your decline, in the perspective of history, you’re going to be doing rather well as a stock investor.

So, thank you for joining us for this edition of Chart Talk.  We look forward to seeing you soon.

 

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