Investing Importance

,A chart was released by the Federal Reserve, courtesy of Axios, that demonstrates the importance of investing to creating personal and generational wealth.

The wealthiest 10% own 93% of all available shares. This is despite the total number of Americans who are invested and own shares has increased. For building long term wealth, investing is the answer. Most people will not end up on this chart, however, learning from the ultra rich provides a road map to wealth, and that map is share ownership. Whether that is through direct company shares or mutual funds, long term investing provides the avenue to wealth creation.
A second chart shows the performance of different asset classes per year over the past decade.

In any given year, the highest performing asset class may change, but there have been some trends. Investing in the largest companies (S & P 500) has had the highest return over the past decade. A diversified, equal weighted portfolio has been right in the middle, which is to be expected and cash is near the bottom. Holding cash typically has a negative real return as it does not appreciate in value and loses purchasing power due to inflation. To beat inflation, returns have to exceed that cost. This is where the investment decision comes in; where to allocate financial resources given risk tolerance, time horizon, expected returns, etc.
Working and consulting with a qualified financial advisor is helpful in answering those questions and determining what the best allocation is for every individual. These charts help with the questions to ask and where to put those resources to build wealth.