12 Graphs You Should Know
Simple but Complex For Investors
This installment of The Matt Allen Letter is free for everyone. If you would like to read about stock analysis, stock market analysis, and much more.
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I hope you have been having a great week! This has been a wild week in the finance space. SBF going to prison, CPI release, and today we had the FOMC meetings where the Fed raised the interest rates by another 50 basis points (.50)
I am sure you know this, but if you don’t remember that the fed is raising interest rates in an attempt to slow down the economy which in theory will lower the inflation rate back to their target number of 2% a year. The inflation rate has come down this year, but it still has a long way to go until we get to that 2% number.
In this newsletter, I have assembled some of my favorite graphs that I believe every investor should know and understand. I personally learn from looking at charts/graphs, so I thought that I should share these with you!
1. The Psychology of a Market Cycle
When you invest, it is so important that you understand market cycles. We know in the short term that stocks will go up and down. However, in the long-term stocks usually go up.
2. Smart-sounding reasons to sell stocks
There will always be a smart sounding reason to sell in the short term, but you will regret it in the long term. Take a look at these reasons, but in the long-term stocks went up.
3. History of the Stock Market in One Chart
We have had some tough times in the market, but if you focused on the long-term then it always worked out.
4. Compounding is the 8th Wonder of the World
It does not matter how much money that you get started with, the main thing is that you just start. Compounding will grow your money over time.
5. Largest US Companies by Market Cap (1960-2022)
Just because a stock is number 1 now does not mean it will be in 20 years.
6. This is the best time to invest in stocks:
This is an interesting chart to me. When CEOs seemed the most depressed about the future of the stock market, we actually turned it around and went up. (Compare this with the market cycle chart)
7. The Average Investor Is Their Own Worst Enemy:
The average investor struggles to beat the broader markets over a long-term time frame.
8. Insider Buy/Sell Ratio
“Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” - Peter Lynch
9. Average Investors Have Historically Underperformed
Due to market emotions, the average investor will panic causing them to underperform the broader stock market.
10.The Cycle of Market Emotions
Investor psychology will wreck havoc on the average investor, but create opportunities for the great investor.
11. S&P 500 Drawdowns Since 1928
The great investors know that drawdowns are part of investing. They create opportunities for the investors that remove their emotion.
12. Politics does not help or hurt the stock market
I love politics. However, have you ever heard a politician claim that if their opponent gets elected, it will crash the stock market? As you can see from the graph above, it usually does not matter who is in power for the stock market to be successful.
Stay Hungry, Stay Long,