Two of the Most Important Investment Charts You'll Ever

Two of the Most Important Investment Charts You'll Ever See

March 4, 2019
Tom LimogesBy Tom Limoges
Assistant Vice President - Investments

Investment managers love charts! 

Charts are used to explain concepts, provide support for decisions, and even provide a little humor. For example:

Engineering Flowchart

But in all seriousness, charts have a way of making abstract ideas and trends more visible and memorable. Since the beginning of my career in investments, there have been two charts, in particular, that are just as popular and relevant today as they were back then. Each one emphasizes an important investment philosophy:

1) Diversification

We often refer to the chart above as the “quilt chart.”  Each column represents a year and each asset class is a different color and sorted from the top performer to the bottom.  Contrary to some media investment gurus, in reality there is no pattern that reveals what asset class is going to be the best in the next year.  The white boxes (in the middle) are the diversified portfolio that combines all of the asset classes which provides the most constant results over time. 

Last year was unique in that cash was the only thing that produced a positive return.  All other major categories fell in 2018, a first since before the financial crisis a decade ago. It is interesting to note that the 2018 results were the exact opposite of 2017 -- almost nothing worked last year, while all categories showed nice gains in the prior year. 

THE TAKEAWAY: It is impossible to consistently identify next year’s winners. A diversified portfolio produces consistent returns and reduces risk over time.  

2) Staying the Course

Return on Investment

This chart illustrates the importance of staying fully invested. It highlights why timing the market is virtually impossible to accomplish.  By missing just a small percentage of the market’s best days in a 20-year period, your portfolio can quickly change course from a positive to a negative rate of return.  What isn’t noted in the chart is that some of the best days in the market are mixed in with some of the worst.   

The old investment advice for stock market investing is to “buy low and to sell high”.  This makes perfect sense until investor psychology gets in the way.  As humans, we naturally lean toward wanting to sell our riskier investments during shorter periods of market volatility rather than remain on course for the longer term.  The fourth quarter of 2018 provides us the most recent example.  Had investors sold out of the market on Christmas Eve, they would have missed out on a nearly 20% upswing in the market through March 1.

THE TAKEAWAY: Stick with your plan and stay the course.     

What these charts and our new brand identity have in common: 

One of the only constants in life is that things inevitably change.  On March 1, Security National Bank introduced a new brand identity.  The refreshed logo is part of a broader brand design that reflects our high standards and formalized statement of what has been our historical bank-wide vision.

Our motto is, “Everything Matters.” The customer, and our relationships with them, give us a purpose in everything we do. The new logo and brand helps visualize Security National Bank’s past, present, and future.  Our look may evolve, but in all our years of service, the essence of who we are has not — and will not change. Our reputation and track record are rock solid, and we're still locally owned and operated. Things change. But like the charts above, our new logo shows that the concepts we stand by — diversification and patience — remain just as important today as they always have.

About the Author

Tom Limoges

Tom Limoges is Vice President of Investments, developing investment strategies for Security National's Wealth Management Division. He holds an M.B.A. from Wayne State (Neb.) College, and has served customers at Security National Bank since 2002.