The Benefits of Investing Early in Life
“Time in the market beats timing the market.”
This quote by Ken Fisher, founder of Fisher Investments, speaks to the often-overlooked benefits of long-term investing.
Timing the market for the perfect trade can be a tricky and potentially dangerous proposition—even for the most seasoned investors. That’s why the buy and hold strategy has been a popular investment tactic among many successful investors like Warren Buffett and Jack Bogle.
And thanks to the power of compound interest, it’s important to start as early as possible. This animated graphic by Sjoerd Tilmans shows the benefits of investing early on in life, and just how much of your total earnings can come from your early years.
The reason that investing early is so beneficial is because of compound interest. Simply put, compound interest is the phenomenon of earning interest on interest.
For instance, let’s say you make an initial deposit of $1,000 in an account that returns 10% annually. By the end of the year, you’ll earn $100 in interest. In the following year, with your total now at $1,100 and assuming the same rate of return, you’ll earn $110 in interest.
And these annual gains, while starting off small, add up significantly over time.
What If I Double Down When I Have More Money?
What happens when you wait to invest?
Though you should only invest money that you don’t need access to in the short term, the reality is that waiting will have consequences on your long-term gains.
For example, let’s say you started investing at 20 years old, and you invest $250 each month with an 8% annual rate of return. By the time you reach 65, over 50% of your total portfolio would have come from money that you invested in your 20s.
Someone who invests a decade later than their peer with double the amount will see actually see lower returns in the long run. For a more thorough breakdown, check out this infographic that goes into detail about the power of compound interest.
Long-Term Investing is Declining
Despite the benefits of long-term investing, it seems that many investors these days are opting for shorter holding periods and quick gains over long-term growth.
For instance, according to the NYSE, the average holding period for stocks in the late 1950s was 8 years. By June 2020, the average holding period had dropped to 5.5 months.
That being said, recent interest rate hikes and threats of a recession could lead to a major slowdown. While quick-win investing has been trending in recent years, we may very well see long-term investment strategies regain some footing.
This article was published as a part of Visual Capitalist's Creator Program, which features data-driven visuals from some of our favorite Creators around the world.
Visualizing BlackRock’s Top Equity Holdings
BlackRock is the world’s largest asset manager, with over $9 trillion in holdings. Here are the company’s top equity holdings.
Visualizing BlackRock’s Top 25 Equity Holdings
Founded just 34 years ago in 1988, BlackRock has quickly become the world’s largest asset manager with over $9 trillion in assets under management (AUM).
Given this status, BlackRock’s equity portfolio may provide useful insights to investors. To learn more, we’ve visualized the firm’s top 25 equity holdings as of Q1 2023. At that time, these 25 positions were worth over $1 trillion, and they represented about 30% of BlackRock’s overall equity portfolio.
Top 25 Data
The following table shows the data we used to create this infographic. These figures come from BlackRock’s latest 13F filing, which was released on May 12.
|Rank||Name||Sector||Value of Holdings (USD billions)|
|5||Google (Class A)||Communications||$44|
|6||Google (Class C)||Communications||$38|
|8||UnitedHealth Group||Health Care||$35|
|10||Berkshire Hathaway (Class B)||Finance||$32|
|11||Johnson & Johnson||Health Care||$31|
|13||iShares Core S&P 500 ETF||ETF||$29|
|15||JPMorgan Chase & Co||Finance||$25|
|16||Procter & Gamble Co||Consumer Staples||$24|
|18||Home Depot||Consumer Discretionary||$23|
|19||Eli Lilly And Co||Health Care||$23|
|20||Merck & Co||Health Care||$22|
|24||Coca-Cola Co||Consumer Staples||$19|
As expected, BlackRock’s top equity holdings include America’s most established tech companies: Apple, Microsoft, Amazon, and Google.
BlackRock also has large positions in Nvidia and Broadcom, which happen to be America’s two largest semiconductor companies. Given Nvidia’s incredible YTD performance (198% as of June 19th), this position has likely grown even bigger.
Altogether, tech stocks make up 39% of this top 25 list. The next biggest sector would be healthcare, at 13% of the total value.
How much of a controlling stake does BlackRock have in these companies? We answer this question in the following table, which again uses Q1 2023 data.
|Name||% Ownership||Quarter 1st Owned|
|Merck & Co||8.24%||Q3 2007|
|UnitedHealth Group||8.02%||Q4 2008|
|Berkshire Hathaway (Class B)||7.98%||Q3 2007|
|Home Depot||7.60%||Q3 2007|
|Coca-Cola Co||7.20%||Q3 2007|
|Google (Class A)||7.09%||Q3 2007|
|Eli Lilly And Co||6.90%||Q3 2007|
|Procter & Gamble Co||6.86%||Q3 2007|
|Exxon Mobil||6.83%||Q3 2007|
|JPMorgan Chase & Co||6.59%||Q3 2007|
|Johnson & Johnson||6.46%||Q3 2007|
|Google (Class C)||6.13%||Q2 2014|
Google’s Class C shares (Ticker: GOOG) do not offer voting rights.
When it comes to shareholder voting, BlackRock has historically voted on behalf of its clients to “advance their long-term economic interests.” Given its massive size, some people believe that BlackRock has too much influence on major corporations.
In 2021, it was reported that BlackRock would begin allowing some institutional clients to cast their own votes at shareholder meetings.
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