The Andex Chart - And a Young Man's Responsibility to Become A Better Educated Investor
Graeme R. Kirkland, CIM
Senior Investment Advisor - Argosy Securities Inc. - Toronto
Prologue
Some time ago, I played golf with the family of a gentleman I have served for many years now, helping this gentleman and his wife with their retirement savings - their RRSPs, Spousal RRSPs, TFSAs, RESPs, LIRA, margin account, and more.
The golf foursome consisted of myself, the gentleman, his wife, and someone I first met when he was a small tyke, his now grown-up, fully adult son, well past his primary-school boyhood I saw when I first met him, many years ago. This boy was now a young man, well into his 20s.
Low and behold, it was time, so this young man came to believe, that he wanted to intelligently invest. He had saved some money from his various work assignments, and wanted it to grow, on its own. He came to me for this task.
I did my earnest best with this young fellow to make it very clear to him that the greater growth he wanted of his capital, came with likely downward fluctuations, so at various points, he would see less than he saw before, including potentially less than he originally invested. I did my best to make it clear to this young fellow, as in fact I do with anybody I work with, that the 'price' to enjoying superior equity growth as an investor, is a requirement to accept, tolerate, or ultimately be comfortable with, depreciation of your assets.
As famous economist and investor John Maynard Keynes, "who lost a fortune in the Great Depression yet lived to fight another day," expressed so well:
"I should say that it is from time to time the duty of a serious investor to accept the depreciation of his holdings with equanimity."
It was instructional of this lad and of his teachings, or lack thereof, that he responded to me, at my attempt to broach sobriety and reality to him, with: "Well why wouldn't you just wait until the stocks drop, and then (!), buy the stocks!?"
I chuckled back at him, "I don't have that crystal ball; nor do other men. You need to understand this!"
As we all do, this young man has some learning to do, and I believe it is part of my job, to the reasonable best of my professional ability, to help him become better educated in good equity investing, for his future.
Then, I thought, "Perhaps he and his father, as I did with my father many years ago, may come closer together in their relationship, through discussion and engagement in the wonderful world of the global capital markets."
Today I sent this boy and his father the most recent Andex chart! A very good start towards gaining a better, reasonable understanding of investing and the equity markets, and other markets.
The Andex Chart
The Andex Chart is produced annually by Morningstar and the Financial Fitness Group (USA), the Andex chart is a historical story of the last 69 years of history, with the most recent Andex chart spanning from 1950 - 2019.
In all the years I have worked in the investment industry, I have found each year's fresh, new Andex chart, and its story of the economy and the markets, to always be wonderful, educational and fascinating. Complete with past Presidential periods from Truman to Trump;
and past Prime Ministers from Diefenbaker to Trudeau, the Andex chart is a most wonderful historical focus.
While there is nothing as good as actually seeing the official Andex chart each year, and all of the wonderful detail it contains cannot be easily readable in this context; I can share just a few, of the many wonderful points of history, that I found in the most recent 2019 Andex chart. Please note: This, is only but a small glimpse, of each year's wonderfully fascinating, much more expansive, very detailed Canadian-version of the Andex chart:
1950: 1 First Class Canadian Stamp: Price: $0.04 versus 2019: 1 Domestic Canadian Stamp: $1.05 + GST
1952: Canada's First TV Broadcast
1957: RRSP (Registered Retirement Savings Plan) Started, with a Limit of $2,500
1965: CPP (Canada Pension Plan) was Approved for Canadians
1973: Average Canadian Family Income: $12,716 versus 2011: Average Family Income: $95,000
1981: GICs (Guaranteed Investment Certificates) Interest Paid: 17.5%
5 Year Mortgage Interest: 21.5%
1985: Northland Bank and Canadian Commercial Bank went Bankrupt
1992: Olympia & York Bankruptcy
1994: Confederated Life Insurance Company (Founded: 1871) - Failure
2000: Nortel: Traded at a High of $124.50/share, and was 34.2% of The Toronto Stock Exchange
2007: The first i-Phone was released
2008: The U.S./Global Subprime Credit Crisis
2011: The United States Credit Rating was Downgraded by S & P Credit Rating Agency
2016: Brexit
Over 69 years, from 1950 - 2019, 5 year GIC (Guaranteed Investment Certificate) returns averaged +3.5%. $100 invested as such, in 1950, by 2019, would have grown to $1,119.00
Over 69 years, from 1950 - 2019, US Small Cap Stock returns averaged +13.7%. $100 invested as such, in 1950, by 2019, would have grown to $743,536.00
The Andex certainly shows other areas of the risk-reward spectrum, including: T-Bills, Bonds, Blue Chip Stocks, and more.
The 2019 Andex chart shows historical average annual equity returns of +7.8% for the Toronto Stock Exchange Composite Index versus +16.2% for The US Large Cap Total Return investment space.
Fundamentally, and importantly, the Andex chart shows that despite ups and downs of equities and other non-guaranteed, 'risky' or volatile asset classes, investors tend to see their investment grow, over time.
Those investors who have no tolerance of the natural, ephemeral 'ups and downs' and dynamics of equity markets, in the end, generally don't have much to show for their intolerance of these natural dynamics.
Whereas those investors, who do withstand the natural ups and downs and dynamic action of variably priced and variably valued equities, tend to see their investments grow in a much stronger manner, long term.
If you have not yet seen this year's Andex chart, I encourage you to secure a copy of this great annually renewed markets and economic chart-story-piece; and learn, and enjoy seeing the natural expansion, contraction, and varying potential, different investors can achieve.
And now, I will find a copy of this great Andex chart, and send it off to that young man, in hopes that he will take the time to read, study, learn, and become a more intelligent, better investor ahead, for many years to become and achieve greatness ahead!
Then, I have done my part in his educational process; he must do his part to become better educated, unless of course, he wish to be limited to only gaining financially through working for the rest of his life, without ever having his capital to be at work, most effectively, for him.
For more information on where to get a version of this chart or other financial charts, images and materials, visit andexcharts.com
I have provided the most current Andex chart herein for you to learn from.
Please Enjoy!
Yours Respectfully,
Graeme Kirkland
Graeme R. Kirkland, CIM
Senior Investment Advisor
Argosy Securities Inc. - Toronto
3280 Bloor Street West, Suite 1140
11th Floor, Centre Tower
Toronto, ON M8X 2X3
t: 647. 479. 6980
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Disclaimer: The views expressed do not necessarily reflect the opinion of Argosy Securities Inc. Neither Argosy nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. Please consult a professional before making an investment decision.
Forward Looking statements: Certain information set forth in this material contains forward-looking information. Forward Looking Information is subject to risks and uncertainties and is not guarantees of future performance. The information contained herein is based upon what the writer believes to be reasonable; the writer cannot assure that actual results will be consistent. Undue reliance should not be placed on them.
Historical analysis does not reflect future returns; Investing involves risk.
Sources: Morningstar, The FFG (The Financial Fitness Group), "The Great Minds of Investing" (by William Green/Henrick Leber), Graeme R. Kirkland, CIM. Date. Sept 1, 2020