In our recent quarterly reports to clients, we included a new graph entitled “Capital Flows.” Each is unique to an individual client, and often tells a very powerful story by illustrating the benefits of long-term investing.
Below are a few sample graphs from actual client portfolios. The light blue line represents the net investment – total contributions less withdrawals – and the dark shaded area represents the total portfolio value. The shaded portion above the light blue line represents investment earnings.
- Steady Contributions over Time
The first chart shows an upward sloping (and somewhat bumpy) light blue line, which illustrates regular and frequent contributions over an extended period.
Notice the growth of the investment earnings – “the gap” – over time.
- One Lump-Sum Deposit
The next graph illustrates the growth of a single deposit of approximately $22,000, with no additional contributions, and no withdrawals. Investment earnings dip below the net investment for a short period, but the chart tells the rest of the story nicely.
- Steady Withdrawals over Time
The final chart shows steady withdrawals (indicated by the falling light blue line) beginning immediately, and continuing until finally, in 2018, the client has withdrawn more than their initial deposit.
While each client’s own graph may look quite different, depending on their own “net investment” – the story we hope these graphs tell is that time, along with adherence to a sound investment approach, can be a huge factor in the growth of investment earnings – “the gap” – which itself is a good representation of the cost of not being invested.
For a great read on the impact of time on an investment plan, check out Bo’s recent blog, Compounding – The Eighth Wonder of the World.
The above graphs are presented for illustration purposes only, and do not represent a presentation of past or future performance by investing in a BCM portfolio. Although the illustrations are from actual client accounts, actual results may vary for all other clients, particularly based one’s investing time horizon. As with all investments, there is always a risk of loss. Past performance is not indicative of future results.